Unethical Leadership Behavior
Unethical Leadership Behavior
Ethical issues are becoming central management and leadership practices because many established organizations have failed to observe and maintain ethical standards. This literature review on moral and immoral leadership contemplates on a western installed private organization (Wells Fargo), pronging towards a conformity-aligned comprehension of ethical and non-ethical management. Currently, executives have to increasingly lead ethically across diversified cultures, thus exceedingly becoming a vital component in developing an organization’s holistic picture among the public. To broadly address this matter, the inquiry purports to pinpoint the cross-lifestyle commonalities and dissimilarities in the executive’s notion of ethical and unethical captaincy. Therefore, the current leadership publications reveal that moral management perception commonalities include but not limited to a leader’s integrity, orientation, honesty, and regard for culpability and continuality.
On the other hand, unethical dominances include the commonalities across leaders of corruption, manipulation, dishonesty, and egocentrism. In that regard, cultural peculiarities of directorial preferences concerning moral and unscrupulous governance are examined. Moreover, the study assesses the intersection of behavioral ethics in Wells Fargo’s direction and follower’s psychological well-being using the infamous event that occurred before 2015 as the foundation. Additionally, the paper examines the distinctiveness of vital leadership constructs associated with behavioral ethics and how they are related to work engagements. Current research modules support that ethical leadership influences the workforce mingling and affects the follower’s burnout through relational identification with the immediate supervisor. Therefore, organizational identification and support, although they do not interact with mediating mechanisms to influence employee’s well-being, contribute immensely to the resulting outcome. Arguably, the research has revealed that organizational arrangements do not serve as a substitute for ethical leadership behaviors. Finally, the study explores theoretical and practical implications that will offer directions through recommendations for future practices that can better the Wells Fargo leadership.
Keywords: ethical and unethical leadership, behavioral ethics, employee well-being, relational identification, perceived organizational support and identification, influence the organization’s staff, financial performance, and culture.
Ethics is derived from a Greek word meaning custom and character; thus, it has to do people’s behavior, and integrity against a specific set of standards and expectations hence serves as a personal guide on what an individual ought to do (Kabeyi, 2018). It is worth noting that ethical issues are exceedingly becoming leadership and management practice essentials since large organizations have failed because of unethical activities. These contrary happenings result in defrauding consumers, creditors, employees, government, and shareholders to massive degrees according to the scandal nature. Therefore, enterprises are demanded to exercise the creation of ethical environments through the provision of ethical modeling roles and decisions that save the company in entirety from ethical dilemmas. On the other hand, the workforce should think and act ethically to save the entity and themselves from unethical conduct costs.
Ethical leadership is costly and challenging to account for and measure. Still, it carries along with extensive benefits since it builds trust and respect, which are fundamental aspects for successful long term personal and business development. Therefore, leaders play a unique role as models and innovators of an ethical organization environment geared towards realizing those corporate and individual gains. Unethical leadership is associated with the leader’s behavioral conduct and decision making that violates moral standards while imposing processes and structures that promote followers misbehaving. However, although not all unprincipled command resolutions are preconceived, unwilling and impotence to ponder beyond exclusive interests and gains entertains a leadership setup behaving unethically. In that regard, this study examines a scandalous case associated with Wells Fargo, the key competencies that could have been included, and the perceived influence among the organization’s staff, financial performance, and culture. Moreover, this paper sets to explore in details the literature accommodated by various publications (articles and books) regarding the topic of ethical leadership and leaders, and its essentiality in sustained organization development. Finally, it offers recommendations concerning policy changes after analyzing ethical leadership skills and knowledge required to evade such occurrences.
Ethical leadership is easily defined under moral person and manager perspectives. A virtuous person entails honesty and trustworthy qualities that enable concern demonstration under fair and principled umbrellas, thus displaying consistency as individual and professional endeavors. On the other hand, a moral manager utilizes the tools entailed in the position of leadership to promote particular work conduct, especially standing out as a role model through walking the talk and talking the walk. Therefore, ethical leadership invites practicing what an individual preaches. In that regard, the use of prescriptively suitable comportment by utilizing personal exploits, relational correlation and promoting the same to the workforce sums the description of an ethical leader (Kabeyi, 2018). Leaders within a working environment set the tone for organizational behavior and goals through what they incentivize since it communicates values coupled with motivating the workforce to act in specific ways. Therefore, employees turn to leaders for advice when ethical questions and problems arise hence relying heavily on them. Researchers support the contention that shows that the staff conforms to their leader’s moral values. Leadership trends define positively productive work behavior markers and negatively influence counterproductive work conduct.
A competent and ethical leader should, at the very least, encompass a set of skills, abilities, knowledge, and attitudes that capacitate that individual to navigate moral challenges adequately, thus making decisions and behaviors rooted under high ethical demands. Being ethically competent as a leader entails more than just doing the right thing in a given situation to include active promotion of ethics within an organization. In that regard, these leaders are demanded to observe both ethical capacity and moral reasoning at a personal level. Precisely, a leader is responsible for improving organizational profitability so that short-term gains maximization do not induce scandals; thus, the more need to acquire all the skills, knowledge, and competencies so as to become an ethical leader (Tushar, 2017). Arguably, unethical and irresponsible behaviors of leaders damage immensely the trust and credibility of organizations since the culture declines their overall performance. Therefore, a leader must possess all required credentials that facilitate protecting and serving the stakeholders, employees, organization, and the community at large while sustaining the organization not only economically but also socially, ethically, and environmentally.
Wells Fargo case study
Wells Fargo has for a lengthy period enjoyed sound management eminence because it used its financial robustness to acquire Wachovia at a time when the financial crisis was at the peak and arguably formed the third-sizeable bank by assets in the nation. The enterprise success bases on communal and lucrative modules that invite sound customer correspondence through passionately affianced sales heritage. Just recently, Well Fargo has been in the spotlight over misappropriation of funds. The Wells Fargo impropriety arose as a sequel of extreme duress upon the workforce to achieve a targeted sales margin required to be met through cross-selling (Venable, 2017). There have been reports exploring investigations into sales executions that have enabled hirelings to open spurious accounts under the disguise of meeting belligerent sales bags. Reports in the media indicate that conveners of its community bank division buckled the trade replica and discharge management network, stimulating an ambience that occasioned shallow-class deals inducing dishonorable and disreputable etiquette. The New York Times delineated that the corporation’s chief executive had faced the “senate banking committee” in September 2016 and proceeded on also before the “house financial services committee” to shed light concerning the assertions (Henning, 2017). In that regard, this displayed a clear picture of how companies find it difficult to act ethically in matters of making more money.
Precisely, the concept of balancing ethics and making more money becomes challenging. The company’s chief executive portrays this after the Los Angeles city attorney had supplicated them over factious accounts writing an email puzzled if anyone had done something wrong. Moreover, even after the bank had settled the charges, the chief executive, when appeared before the House Financial Services Committee, maintained that nothing was really wrong (Henning, 2017). In that regard, the executive officer displayed unethical leadership qualities by transposing the guilt to lower-level staff and failing to acknowledge the gravitas of the problem coupled with the weighty risk to Wells Fargo. Moreover, the problem did not precipitously surface since there were attestations earlier though the leadership did nothing to address the issue inducing management squabbles and exonerating administration until to date. Therefore, not unless Wells Fargo exerts immense efforts to change its culture, this public opinion concerning its moving picture will remain forever. The likelihood of future misconduct of such magnitudes, if they do not claw back compensation from former executives, will keep on recurring.
Corporate chiefs and observers acknowledge that lifestyle is a censorious donor to staff arrangement, performance, and motivation. However, the complexion of the parallels and the apparatus utilized in inculcating the coveted values among the workforce regarding conduct deems challenging to actualize. However, governance practices and financial incentives reinforce culture but particularly when rewarding workforce for attaining a specific benchmarks without concern to ventures taken to realize the merit faults those incentives to opposing the culture (Tayan, 2019). The cross-selling strategy was formed on a strong foundation that the more Wells Fargo’s products a customer had, the more documentation the bank had concerning the client facilitating enhanced decisions on credit, pricing, and product grounds.
Precisely, employees acted unethically in a bid to acquire their daily cross-selling targets. Tayan (2019) agitates that these staff practiced irregular behaviors of opening fresh accounts, furnishing credit and magnetic cards by fabricating signatures signifying that multiple customers did not know about the activities. Therefore, some leaders, although pronouncing to take the matter seriously, acted unethically by cocooning the happening as a simple affair that the set goals blinded the employees. Arguably, it is more disappointing since these leaders made the utterances in public, meaning that they were shielding the wrongdoing. Moreover, employees were offered financial rewards after realizing their targets with leaders not focusing on how they actualized the goals hence creating loopholes. Generally, the entire senior leadership fraternity failed in the protection mechanism employed to stem the problem that seemed intractable and systematic than they anticipated.
Competence gaps created
The Wells Fargo mores encompassed all brackets of credit and banking narratives and services. The then chief executive officer preached, “Eight is great,” creating a scenario that forced the employees to increase their customer count to higher levels (Bishop, 2018). In that regard, the level of incentives employed to actualize the spirit created a huge competence gap in their overall operations. Arguably, introducing specific rewards induced a spectrum of both standard and dangerous behaviors. The organization structure, specifically on the community bank arena, encompassed its own risk and auditing mechanisms, creating a foundation to do things away from the senior management accord. Witman (2018) argues that some units had solid lines of reporting directly to the head of the bank, while others honored respective corporate groups. Precisely, the introduction of such avenues away from the top management invites a lot of loopholes that accrue incompetence and elevate competition for those yearning for senior positions inducing leniency.
The scandal raised an avenue of counter-accusations and a shift of blame games. It is worth noting that the chief executive officer blamed employees, indicating they did not equal the corporation’s heritage and social merits. In contrast, the employees blamed the human resource department for focusing more on goals than ethics (Witman, 2018). These doings invites incompetence among the management since an enormous number of employees were being sacked for failing to meet targets. In that regard, employees applied for gigantic potentially unauthorized charge cards, matriculated customers in internet banking and accoutered swipe cards without customer’s consent, and opened fraudulent accounts using email addresses to counter the sacking (Kaufman & Art, 2017). Moreover, some of the employee’s contracts were terminated and blacklisted if they grumbled in respect to the trade goals and or made assertions of misconduct. In addition, the cross-selling strategy that entailed expanding customer’s relationships by multiple services and accounts sale forms the basis of ethicality in the banking system. The bankers acted incompetently concerning scrutinizing the particulars of account holders.
Scandals, regardless of the magnitude, affect the staff, performance, and culture of any organization adversely. During the scandalous era at Wells Fargo, history has it that approximately 1.5 million deposit accounts that customers did not authorize were in place (Antonacopoulou, Bento, & White, 2019). The environment, therefore, signifies a massive boost for employee’s sales and high financial performance that proved to actualize the corporation’s culture. Unfortunately, in the wake of the scandal publication, all these aspects turned negatively to the overall development. It is worth noting that the transgression was not an endeavor to swindle customers of their merit-deserved currency but an employee’s strive to milk the abysmally supervised indemnification project incentive. Arguably, the staff earned immensely from their sales.
Due to the malicious damage caused by fraudulent acts, various authorities sought to investigate the scandal. In that regard, findings indicated wrongdoing imposing penalties that were levied both financially and compliance plan basis (Sisco, 2017). These implications affected Wells Fargo Corporation adversely in its entirety. The general and most striking loss was the beginning of financial suffering and loss of the leadership. Moreover, approximately 5300 employees were sacked, the top management bonuses reduced, and community bank division head stock options canceled, affecting hugely the workforce (Witman, 2018). Precisely, disruption of managerial structure and decline of the workforce influenced the financial performance of the enterprise badly, bringing to alt the once praised culture in its entirety. Additionally, the culture of conducting business changed through eliminating product and sales goals across its retail-banking units coupled with a strict strategy of judging employees on customer feedback, a move that was not utilized earlier (Kaufman & Art, 2017). Besides, no sane individual would wish to associate with the infamous organization; therefore, the corporation was walloped by losing clients since numerous of them opted to bank elsewhere.
The choice of measuring employee’s performance based on products per customer is a wrong move. Therefore, more efforts should be exerted to focus on customer balances and profitability as a direct gauge to staff performance. Secondly, rumors end up becoming true, so once the news broke, the corporation could have acted swiftly to manage it before the eruption. This is a clear indication that the enterprise lacks adequate data storage mechanism that could back the claim and resolve it soonest possible. In that regard, data collection and storage mechanisms need to be innovated and implemented. Finally, financial rewards incentives to improve staff performance are an essential reach. However, these strategies invite prior planning and structuring a follow-up procedure that provides a strong foundation for awarding them. Therefore, the move should not focus entirely on sales; instead should incorporate the proceeds followed in its entirety actualization. This entails weighing staff’s interactions with customers and the outcomes of the same, laying a strong foundation for ethical behavior and policy observance.
An ethical leader should be open to considerations regarding effective information use geared towards managing organizations so that they incentivize the proper behavior and enable capacities for timely inappropriate behavior detection. The cases of measuring performance should hugely dominant on customer feedback and teamwork participation. Gauging the staff on individual levels opens avenues for fraudulent acts since each is on the run to entice the employer. Majoring on profitability checks rather than consumer and employee balances aggravates loopholes for faults. Moreover, no people are immune to making imperfect decisions, but it is crucial to understand the tasks awarded to employees to make decisions. It is no doubt that the policy employed at Wells Fargo meant profit actualization without considering the results and how they made it possible. This will induce a culture that frees employees to make the right decisions due to the follow-up mechanism in place, thus influencing the financial performance directly. Arguably, all sales will be guaranteed to emanate from natural processes hence facilitating improvements on low performing forums.
Corporations accommodate and generate massive data on a daily basis. Therefore, it is equally essential to have adequate storage mechanisms. Precisely, it is challenging without proper data to measure the profitability of a specific customer and their interactions with the staff. In that regard, the concept spells doom if the corporation does not make significant in information gathering and storage, as witnessed with the scandal. Arguably, the culture practiced, although high performance financially lacked tracking data, carries immense weight in tracking firm’s activities. This is a big failure to leadership ethics since information is a contributor to organizational success hence a key component in management. Precisely, an ethical leader knows the importance of information collection and storage, which facilitates elevated financial progress because it enables improving less performing departments. In that regard, employing this culture that was not previously utilized ensures commercial mushroom and a robust back-up foundation.
Reward incentives motivate employees to exert more effort in actualizing performance. An ethical leader knows for sure that the strategy should arise as a mode to sustain profitability. Arguably, bad financial performance cannot accommodate such a scheme, thus meaning it is employed when the finances are stable. In that regard, proper structures on how employees achieve the reward need to be in place geared at reducing malicious damages induced through unwarranted behaviors. The culture that Wells Fargo had in place lacked supervision; hence the management failed ethically. Therefore, the move was tremendous but demanded an overhaul of the policy to accommodate crucial components such as tracking consumer satisfaction feedback, the interaction process with staff, and the team’s efforts exerted in the procedure. In other words, it should be elevated to a teamwork incentive rather than individual-based. Moreover, the scheme should not be introduced to induce pressure on minimum wage earners in pursuit to get the reward, produce, and evade the risk of losing job opportunities as witnessed in the corporation but rather a strategy to sustain and elevate financial prowess. Finally, the employee’s behavior towards a particular scheme should be the basis of measuring its positivity. As an ethical leader, information management understanding contributes hugely to corporate culture and financial sustainability. Therefore, the right metrics, coupled with monitoring over time, are crucial to chanting proper incentives that achieve and sustain corporate results.
Antonacopoulou, E. P., Bento, R. F., & White, L. (2019). Why didn’t the watchdogs bark? Internal auditing and the Wells Fargo scandal. In Academy of Management Proceedings. 1, 12966. Briarcliff Manor, NY 10510: Academy of Management.
Bishop, E. E. (2018). An analysis of motivation and culture: Examining the 2009-2016 Wells Fargo case. Doctoral dissertation, Indiana University.
Henning, P.J. (2017). White collar watch: When money gets in the way of corporate ethics. The New York Times. Retrieved from: https://www.nytimes.com/2017/04/17/business/dealbook/when-money-gets-in-the-way-of-corporate-ethics.html
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Kaufman, M., & Art, D. (2017). “Lions Hunting Zebras”: The Wells Fargo fake accounts scandal and its aftermath. Review of Banking & Financial Law. 36, 434.
Sisco, H. F. (2017). Financial crisis management and Wells Fargo reputation or profit?. The Handbook of Financial Communication and Investor Relations. 319.
Tayan, B. (2019). The Wells Fargo cross-selling scandal. Stanford Closer Look Series.
Tushar, H. (2017). The role of ethical leadership in developing sustainable organization. International Journal of Humanities and Social Science. 3, 83-95.
Venable, J.T. (2017). Wells Fargo: Where did they go wrong. 10.13140/RG.2.2.12320.99848.
Witman, P.D. (2018). “What gets measured, gets managed” the Wells Fargo account opening scandal. Journal of Information Systems Education. 29(3), 131-138.