The Wells Fargo Scandal

The Wells Fargo Scandal

The Wells Fargo Scandal is a significant topic that has recently taken center stage in news. The business is among the biggest in both the US and the entire world. The issue started in 2013, when the Los Angeles Times discovered that staff had opened accounts without consumers' consent because they had sales objectives to meet at work (Dwyer, 2017). Michael Feuer, an attorney, didn't begin looking into the situation until May 2015. The investigation's findings revealed that the business fired approximately 1500 employees between 2011 and 2015 for creating over 2 million unlawful accounts (Dwyer, 2017). After these revelations, Wells Fargo had to pay about $185 million in fines and refunds to affected customers (Dwyer, 2017). The scandal did not end there as the firm was faced with a number of lawsuits by affected customers as well as employees. Latest revelations show that additional 1.4 million accounts were fraudulently opened by the firm's employees (Egan, 2017). The scandal has affected the operations of the firm significantly as it has suffered both reputation and financial damage. The sections below examine important aspects relating to the scandal.

Challenge Faced by Wells Fargo

After the revelations of the scandal, a major challenge facing the company is rebuilding its image in the eye of the customer. The revelations that continue to emerge from the scandal only indicate that the management has not done enough to put an end it. After the investigations started, the company faced a challenge of how to address it. The investigations by Feuer found that employees had been fired between 2011 and 2015 in relation to the scandal. This shows that the management of the company was already aware of the practice by its employees right from 2011.

In the midst of trying to rebuild trust and repair its image, the company is continually facing lawsuits as a result of the scandal. This is also another challenge because it becomes difficult to repair its image when lawsuits are filed against it regularly. Given the magnitude of the scandal and the size of the firm, any lawsuits brought against the firm attract huge media attention and the progress made towards rebuilding reputation is ruined. Therefore, the company faces the challenge of putting the scandal behind and trying to regain the trust of its customers. Given that it operates in a competitive market environment, the company can easily lose customers to competitors. It is also unlikely for new customers to join the company because of the scandal. It is deducible that it is going to take longer before Wells Fargo regains its reputation.

Management Response

The response of management to organization's scandal determines how the customers are going to view the firm into the future. According to Lee (2004), the crisis response by management determines how the consumers judge the responsibility of the organization. In the case of Wells Fargo, it is arguable that the management's response was poor given that it is still facing lawsuits up to date. Despite the company being aware of the fraudulent activities since 2011, it is only when it fully erupted that management took steps to salvage the situation.

The initial response of the management to the scandal was firing employees involved. As mentioned earlier, the LA Times had reported in 2013 that the company was placing undue pressure on employees to fulfill quotas. When employees opened the fraudulent accounts, they were fired. Management has also been blamed for instructing the employees to open the fake accounts. According to Dwyer (2017), some employees filed a lawsuit against the firm for demoting or firing them because they refused to participate in the fraudulent practice. This shows the response of the management to be contradicting since it encouraged the opening of the fake accounts while at the same time fired those who engaged in the practice. The undue pressure from the top management could have contributed to the scandal.

Another management response was the resigning of the firm's CEO, John Stumpf who was immediately replaced by Timothy Sloan. Such change of the management was necessary although Sloan had been part of the management previously. Another response of the organization towards the scandal was cutting down of 70 senior managerial jobs (Keller, 2017). The move was meant to reduce the levels of management in the company.

Analysis of Management Response

The way an organization responds to crisis determines the directions its services and products will take in the market. The management of such scandals, therefore, needs to be done carefully. According to Laufer & Coombs (2006), managers should not underestimate the importance of handling crises effectively since they can affect market share, stock prices, and sales of other company products negatively.

It is evident that the response of the management of the company to the scandal was poor. As noted above, the company fired employees since 2011 for the fraudulent practice. This shows that it was aware that there were fraudulent practices going on in the firm. However, the company did not make a serious investigation into the matter. If at all it had planned on solving the problem when it first emerged, it would not have escalated to the level it is at the moment. The initial response of firing employees was wrong given that it was the management that was giving them undue pressure. In addition, as seen above, some employees were forced to open the fake accounts and those who did not were demoted or fired. The management did not respond to the root of the problem.

The reigning of the firm's CEO was an expected move after overseeing such a huge scandal. However, replacing him with Sloan was not considerate of the situation the company was in. Sloan had been part of the management when the scandal was happening. There was a need for a new face from outside. The reduction of management levels was an essential move since the many previous levels contributed to the undue pressure to the employees of the company.

I would have responded to the situation from the moment it emerged that fraudulent accounts were being opened. Through an internal investigation, I would have found the root of the problem and addressed it before it escalates. However, after the scandal had fully erupted, a recommended response for the firm would be an overhaul of senior management and having them replaced with new faces. This would give a new direction to the organization. In addition, the change would be evident in the eye of the public and the reputation would not have been damaged as much. As noted by Claeys, Cauberghe, & Vyncke (2010), offering an apology can be more effective in rebuilding reputation than playing down or denying the existence of a crisis. In this sense, therefore, I would offer a public apology and promise consumers better services.


As one of the biggest firms in the US and in the world, Wells Fargo serves many customers. The scandal of opening fraudulent accounts without the knowledge of customers negatively affected the firm. Not only is the reputation of the firm ruined, but it has also suffered financial damage in the form of fines and refunds. Given that the firm was aware of the practice as early as 2011, its response was poor. A better response would have been finding and solving the problem as soon as it emerged. In addition, the company should have hired a new CEO from outside the organization rather than promoting a member who had witnessed the escalation of the scandal.


Claeys, A.-S., Cauberghe, V., & Vyncke, P. (2010). Restoring reputations in times of crisis: An experimental study of the Situational Crisis Communication Theory and the moderating effects of locus of control. Public Relations Review , 36 (3), 256-262.

Dwyer, K. (2017). Timeline: How the Wells Fargo scandals unfolded. Retrieved September 26, 2017, from The Morning Call:

Egan, M. (2017, August 31). Wells Fargo uncovers up to 1.4 million more fake accounts. Retrieved September 26, 2017, from CNN Money:

Keller, L. J. (2017, July 28). Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal. Retrieved September 26, 2017, from Bloomberg:

Laufer, D., & Coombs., W. T. (2006). How should a company respond to a product harm crisis? The role of corporate reputation and consumer-based cues. Business Horizons , 49 (5), 379-385.

Lee, B. K. (2004). Audience-oriented approach to crisis communication: A study of Hong Kong consumers’ evaluation of an organizational crisis. Communication research , 31 (5), 600-618.

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