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John Preston and Michael Segal
Team #7
2/16/17
Professor Hogg
Paper #1
Wells Fargo and the Ethical Theory of Utility
I. Facts
In Fall 2016 reports began to surface that over the past five years Wells Fargo Bank had
been opening fraudulent accounts to satisfy steep sales quotas in a high-pressure work
environment (McGrath, 2016). Cross-selling is an excellent method of selling different products
to each of a company’s clients. Obtaining new customers is expensive and cross-selling is an
efficient way of maximizing revenues across a client base. The CEO of Wells Fargo, John
Stumpf decided that giving all of Wells Fargo’s employees the target of selling eight different
products to each customer would be an effective way of improving the company’s cross-selling
strategy. Stumpf reached this number through no research or analysis but because “it rhymed
with great” (Hogg, 2017). Wells Fargo unreasonably mandated that all employees met the quota
of eight products per customer. Managers threatened to lay off employees or force them to work
unpaid overtime if they did not meet the quota. The intense pressure put on the employees by
the managers fostered a dishonest work environment. Employees felt the only way they could
keep their jobs was by cutting corners. Employees opened over two million bank and credit card
accounts for customers who did not ask for them (McGrath, 2016). Most customers were
unaffected by the employee’s actions, but about 85,000 deposit accounts and 14,000 credit card
accounts incurred fees totaling at around $2,403,145, required refunding (Hogg, 2017). At the
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closure of 2016, Wells Fargo claimed to have fully repaid the customers who paid fees which
they should not have incurred. L.A. City Attorney Mike Feuer however, disagrees. Feuer stated
that the bank is required to offer mediation to customers who have not been made completely
whole by 2018 and that “ it is too soon to say that all affected Wells Fargo customers have been
made whole” (Freed, Erman, 2017). Wells Fargo fired many of the employees that chose not to
partake in the deceptive practice. Some of the most expensive settlements stemmed from the
wrongful termination of these employees (Domonoske, 2016). The overall result of the quota
was minimal profit for Wells Fargo as well as a severe decline in trust from its customers. Wells
Fargo’s policy and the resulting employee conduct raises ethical issues with the theory of
utility.
II. Issue
The issue is whether Wells Fargo’s quota policy and the resulting employee conduct is
ethical under the Theory of Utility.
III. Rule
To be ethical under the Theory of Utility, an action must produce the best ratio of good to
bad consequences. A primary stakeholder is an individual that is directly impacted by the given
action.
IV. Analysis
A. Current Situation
Wells Fargo’s quota policy encouraged the opening of fraudulent accounts and is
unethical under the Theory of Utility. For an action to be ethical under the Theory of Utility, it
must produce the best ratio of good to bad consequences. A primary stakeholder is an individual
that is directly impacted by the given action. Customers, employees, and management were all
directly impacted by the Wells Fargo scandal and therefore fit the definition of primary
stakeholders.
To be ethical under the Theory of Utility an action must produce the best ratio of good to
bad consequences. The customers of Wells Fargo Bank are a primary stakeholder in the scandal
because they entrusted their money to Wells Fargo who in turn committed fraud. The employee
fraud directly affected customers in a negative way as 85,000 deposit accounts and 14,000 credit
card accounts incurred fees requiring funding totaling around $2,403,145 (Hogg, 2017). The
Theory of Utility states that for an act to be ethical it must provide the optimal ratio of positive to
negative consequences for all primary stakeholders. Wells Fargo acted dishonestly towards their
customers by charging for unwarranted services. The quota system created hardship for
