Wells Fargo Scandal: Excessive Pressure Feeds Unethical Acts

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Wells Fargo has found itself in the crosshairs after it paid a record $185 million in fines and faces criminal probes after regulators found employees created nearly 2 million sham accounts in customers’ names without their knowledge.

Tales of the pressure-cooker environment at the bank are surfacing and Michigan Ross Professor Cindy Schipani says it’s exactly that kind of corporate culture that spawns scandal.

“I think the Wells Fargo scandal is a classic case of what happens when performance expectations are out of sync with reality,” she says. “Unattainable expectations become a breeding ground for ethical lapses, leading to illegal and even criminal behavior. Employees may be encouraged either subtly or explicitly to find ways to cut corners to meet expectations and earn promotions or even to just retain their jobs.”

Schipani is the Merwin H. Waterman Collegiate Professor of Business Administration, professor of business law, and studies white-collar crime and ethics.

It’s easy to start down a slippery slope of corner-cutting when your job is at stake, and when you think you can justify it for the “good of the company,” Schipani says. But don’t think the company will stand behind you.

Wells Fargo fired about 5,300 employees, yet none were in the C-suite. In fact, the executive who ran the division where the fraud occurred announced a retirement with bonuses and stock options.

“The company will throw employees who engage in illicit behavior under the bus in a heartbeat when scandals break,” Schipani says.

The fines are unlikely to be the end of the story. Federal and state prosecutors are launching investigations, according to media reports.

“I think we will see either criminal or civil charges brought by the authorities and it will be interesting to see if the executive who ran the division will be subject to a clawback of that golden parachute,” she says.


In this video, Schipani talks about how to tell if your company is ethical: