Ethical Leadership Task 3

Isaias Rivera C206 Task 3

Wells Fargo Code of Ethics

Wells Fargo code of ethics was chosen because of its significant business influence both at a domestic and internal level. As one of the leading global banks, I chose this company and their code of ethics because I wanted to analyze how a major financial institution follows through with their Code of Ethics at a global level.

Company’s Code of Ethics towards Corporate Social Responsibility

As a large company that plays a major role at influences the finances for society, Wells Fargo does not provide sufficient information for the community and society as a whole particularly as it relates Corporate Social Responsibility. Wells Fargo does state as part of vision that “we want to satisfy our customers’ financial needs and help them succeed financially.” They also illustrate under their Goals to be financial leaders in corporate citizenship. However, the 21-page Code of Ethics focuses mainly on the expected conduct from their employees with a limited section on customers and very little information as it relates to supporting communities. The company does articulate under the Code of Ethics to “be known as a trusted neighbor in

the communities where we live and operate.”  However, there is very little information addressing ways the Bank and their team members can be involved in supporting their communities. Their Code of Ethics may need to address how they intend to support communities and how they can be financial leaders in addressing society’s financial challenges.  This may include setting aside volunteer time for employees (as oppose to limitation stated in their Code), financial literacy workshops in schools or non profit organizations, grants to foster economic development, humanitarian initiative, and other programs that involve the bank fulfilling its corporate social responsibility towards  its local and global communities.

Compliance with Legal Mandates

Wells Fargo does a very good job covering topics of compliance with legal mandates. They explain with clarity and detail “to following all applicable laws, rules and regulations that apply to our businesses” such as Anti-Bribery and Anti-Corruption laws that must be met in accordance to their policies. This includes laws not only in the US but also laws in “all jurisdiction in which we operate.”  They further emphasis the importance of complying with all other laws such as anti-competitive, anti-tying, insider trading, sanctions, and anti-boycott laws.  Furthermore, the Bank has multiple parties such as the direct manager, employee relations, human resources professional, the ethics oversight committee, and an audit and examination committee of the board to deal with ethical matters.

The company clearly states that the employees are representatives of Wells Fargo. Their statements rely on the honesty and integrity of its employees. The Bank itself is very aware that they could be held criminally liable if one of its employees or agents violates the code of ethics including committing a crime, violation of the law or policy, and dishonest acts in terms of money mishandling and/or recording.  Wells Fargo could face legal lawsuits and hefty fines if they are found guilty for noncompliance with any legal mandates. Employees can also face loss of employment and potential legal action if found noncompliant towards serious legal mandates.

Two ethical safeguards Wells Fargo has in place to prevent illegal and unethical acts are the “Lets talk ethics – Making the right choices” section and non-retaliation policy for employees to openly report issues. Wells Fargo does a very good job in providing five basic questions for the employee to help them prevent illegal and unethical acts. The questions are:

  1. Does it comply with the spirit or intent of any applicable law, rule, regulations, or regulatory expectation?
  2. Does it comply with our policies?
  3. Is it consistent with our values?
  4. Is it consistent with our long-term goals and interests?
  5. Would I be comfortable with my decisions if it’s made public?

If the answer is no to any of the five questions, then the person should not do it. The non-retaliation policy safeguards the employee acting in good faith who might otherwise feel threatened, afraid, harassed, or even fearful of losing their job by reporting possible misconduct, unethical actions, or violation of security and legal laws.

Development of an Ethical Culture

Wells Fargo stays true to their culture on ensuring everyone is “committed to the highest standards of integrity, transparency, and principled performance.” The Bank’s code of ethics goes into great length tying it with their five values of what’s right for customers, people as competitive advantage, ethics, diversity and inclusion, and leadership.  Moreover, the company give specific details for employees to act in ethical situations. This includes keeping confidential information safe and secure, maintaining accurate records, conflicts of interest, gifts, business expenses, and dealing with customers. These specific and carefully selected areas are covered in great length and detail, so the company can continue to provide an environment conducive to growth, honesty, and integrity.   

Wells Fargo Employee Ethical Concern

Wells Fargo employees have a moral obligation to promptly report any knowledge or information regarding the misconduct, violation, or dishonest act by another employee, third party, customer, or co-worker. Different various parties (depending on the nature of the violation) will then review and resolve the issues at hand. An employee may raise or report ethical concerns via   1-800-382-7250 “ethicsline” or submit a report online through the Wells Fargo Ethicsline web reporting. Non-US based employees can also report by calling using international numbers and access codes. Three resources that an employee has access to are: Ethics Line, their direct Manager, and Audit and Examination committee.  

The Ethicsline serves as the main internal resource for Wells Fargo Employees. If employees have code questions, concerns, complaints, or even possible violations, the ethicsline can document and provide an independent evaluation on the matter and implement steps to prevent and rectify the matter.

Managers serves as another internal resource within the employee’s reporting line.  If the employee feels comfortable with the manager, the manager should be able to provide guidance, counsel, and assistance to employees especially with sensitive matters such as sexual harassment, discrimination, workplace complaints, and violations to the Code of Ethics.

A third source would include the Audit and Examination Committee of the Board. This would mainly deal with issues and concerns regarding accounting, internal accounting controls, and other auditing matters that may misrepresent Wells Fargo financial assets and statements. 

The resource I would most likely use depends on the matter at hand. If the issue involves my current manager, then I would report it towards the ethicsline. If I’m dealing with an ethical dilemma relating to a customer or co-worker, then I would seek my manager. If the ethical matter relates to accounting and financial auditing matters, then I would seek the Audit and Examination Committee Board. Either way, for all three examples I would always submit and online report through the Ethicsline online reporting system just to safeguard and document all my actions.

Policy to Address Unethical Conduct       

Personal and Organizational Factors

There are several personal and organization factors an employee would need to highly consider as a last resort before deciding to the blow the whistle for an unethical conduct at work.

Personal factors include topic such as:

  • Have I gathered all the information I need to before I decide to blow the whistle?
  • Does the issue at hand strongly affect my personal values?
  • Am I doing this for the betterment of society or for personal gain?
  • Am I willing and prepared to face slandering of my good name and reputation? Am I willing to undergo strong scrutiny?
  • Am I willing to have my family or close friends potentially be ridiculed, ostracized, or shunned in their respective schools, work, and community?
  • Am I willing to invest time and money for this issue?
  • Is it worth undergoing added stress to my physical and emotional health?

Organizational factors that an employee would need to consider are:

  • Have I documented all my actions and responses?  
  • Have I addressed the legal, human resource, financial, or business matter to the appropriate department in the company?
  • If the issue is still not addressed after the appropriate channels, do I have all my facts and information ready to send to the CEO or Senior Executive Management?
  • Have I exhausted all my internal resources provided at the company?
  • Am I willing to go outside the company such as a government regulatory agency or even the press?

These are examples of personal and organizational factors the whistleblower must consider after gathering all the rights facts and data.

Internal and External Reporting Steps

If an employee decides to blow the whistle, the employee could follow the following internal and external steps:

Internal

  1. Document all action items such as conversation, phone calls, emails, and any other pertinent information for protection and safeguarding. Please make sure to keep hard and electronic copies.
  2. Exhaust all internal resources such as the manager, human resource, ethics officer, and legal department regarding the violation and disregard to the Code of Ethics.
  3. Prepare a written complaint and send it to senior management along with any evidence to support your claim if the actions by previous levels were non-satisfactory.

External  

  1. If no action was taken by senior management, then consult an attorney and seek legal advice on what legal action should take place and what legal protection is available.
  2. Prepare family and friends on the decision to whistle blow.
  3. Contact the appropriate government or regulatory agency that would handle the ethical issue at hand. Be prepared to speak with the press if the issue is of grave concern.
  4. Be prepared to leave the company and pursue another opportunity.

Advantages and Disadvantages for Whistleblowers     

False Claims Act

The False Claims Act is a Federal Law that awards 15-30% of recovered damages to  whistleblowers who report business wrongdoings defrauding the government and their programs.(Trevino & Nelson, 2017). One advantage for a whistleblower to receive payment from the government under the False Claims Act is that the whistleblower will receive compensation and perhaps viewed as a hero for revealing the truth and stopping the wrongdoing. If millions or billions of dollars are being defrauded, a 15-30% award from recovered funds is a small price to pay. The whistleblower would most likely lose their employment with the company; thus, this award would help them and their families have some financial security as the whistleblower seeks a new opportunity. 

The disadvantage for a whistleblower to receive payment from the government would be that he/she might provide false claims in their report in order to receive a significant financial gain. The whistleblower might be tempted in cleverly tampering, deceiving, and/or exaggerating their claims to not only put the company out of business but to also receive the most financial compensation possible. This can cause a Domino effect where there can be an increase of more whistle blowers solely to have financial gain. 

U.S. Sentencing Guidelines Impacting Business Operations 

The US Sentencing Guidelines provide a standard for companies to not only improve their ethical culture and behavior, but also increase their awareness and compliance to the law. These guidelines are a policy in determining the sentencing given to a corporation who are convicted for serious crimes.  They have changed the way organizations operate by ensuring steps to mitigate any compliance, ethical, and legal risks. The guidelines have prodded companies to be  more self-aware of serious crimes, and help put practices in place so all employees can also follow suit and comply with the law. If an organization has a strong ethics program in place, they will have a lesser culpability score while organizations who do not will face harsher consequence if found guilty for a felony. The US Sentencing guidelines impact business operations in the way they conduct business, comply with the law, and promote strong ethical culture among their stakeholders.

Three Culpability Factors

Three culpability factors that are used to determine fines under U.S. Sentencing Guidelines are: size of the business and degree of participation, prior history, and an effective program to prevent violations (Trevino & Nelson, 2017). The first two are aggravating factors that increase the culpability score and fines meanwhile the final third factor is a mitigating factor that will decrease the culpability score and fines.

The size of the business and the degree of participation is investigated and determined. This includes what level of activity, knowledge, and intentional involvement did the individual or company have in hand with the violation. Who conducted the violation and at what level/authority do they stand within the company? Does it involve small, medium, or large size company within its respective industry? The greater the size of the company with heavy participation than greater is the fine. The smaller the company and low level of participation than smaller is the fine. 

Prior history investigates what actions has the company done before. Is this the first time the company is involved with this misconduct? Does the company have a history with repeated similarly offenses? What actions has the company done to rectify their disregard to the law? If the company continues to disregard the law with repeated offenses, not only will the fines be heavier, but the company could potentially run out of business and declare bankruptcy. If the company has no prior history, then the culpability score and fines will be less.

Effective programs to prevent violation and the disregard to the code of ethics are mitigating factors for the company to reduce their culpability score. This includes in determining if the company has a program in place? Does the program include steps to mitigate compliance and operations risks? What measures are taken to address violations? Overall, how effective is the program? If the company does not have a sound effective program, then it will see no reduction in their culpability score. If the company does have an effective program, then it will see a reduction in both the culpability score and fines.

References

Trevino, L. K., Nelson, K. A. (2017). Managing Business Ethics: Straight Talk about How to Do It Right. [Western Governors University]. Retrieved October 3, 2019 from https://wgu.vitalsource.com/#/books/9781119298519/

Maxwell, J. C. (1999). The 21 indispensable qualities of a leader: Becoming the person that people will want to follow. Nashville, TN: T. Nelson.

Wells Fargo. (n.d.). Our Code of Ethics and Business Conduct. Retrieved October 20, 2019, from https://www08.wellsfargomedia.com/assets/pdf/about/corporate/code-of-ethics.pdf.

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