The costs of unethical behavior are varied and numerous. In addition to a poor reputation, these costs can include reduced customer loyalty and subsequent revenue loss, heavy fines, probation, criminal or civil prosecution, and the loss of needed employee talent. For example, Wells Fargo has paid penalties totaling $170 million and faces civil lawsuits for defrauding customers.
To reach high sales goals, Wells Fargo employees opened unauthorized customer accounts, forged client signatures, charged unnecessary fees on unwanted accounts, and misstated customer phone numbers to hinder customer-satisfaction surveys. Employees resorted to issuing illegal credit cards and lines of credit to avoid pressure from managers. Some employees lost their jobs after reporting the illegal tactics. A civil lawsuit filed in California in 2015 called for reimbursement of the fraudulent fees charged to customers, a fine of $2,500 for each violation of California’s Unfair Competition Law, and an injunction against unethical practices.1Zacks Equity Research, “Wells Fargo Faces LA Lawsuit for Unethical Conduct,” May 5, 2015.
You may have developed your own personal code of ethics, but the social environment of the organization can be a barrier to fulfilling that code if management is behaving unethically. At Enron, vice president Sherron Watkins pointed out the accounting misdeeds, but she didn’t take action beyond sending a memo to the company’s chairman. Although she was hailed as a hero and whistleblower, she in fact did not disclose the issue to the public. Similarly, auditors at Arthur Andersen saw the questionable practices that Enron was pursuing, but when the auditors reported these facts to management, Arthur Andersen’s managers pointed to the $100 million of business they were getting from the Enron account. Those managers put profits ahead of ethics. In the end, both companies were ruined, not to mention the countless employees and shareholders left shattered and financially bankrupt.
Management 2020 text remixed from multiple sources under a CC Attribution-NonCommercial-ShareAlike 4.0 International License. View a complete list of original sources.
