Wells Fargo has faced many challenges, including the scandal on fake accounts where it was alleged that the bank employees opened about 5000 fake accounts and some of them transferred the customers' money. What emerged from this incidence is the failure of the organization’s corporate governance and an unbalanced principal-agent relationship. Corporate governance is fundamental in laying the foundations upon which a successful and ethical principal-agent relationship is built. The management at Wells Fargo failed to set policies that would govern the conduct of the principals. This culminated in the latter resorting to unethical and fraudulent tactics to ensure that their agents raised their sales quotas. The agents were reprimanded, coerced, and given bonuses, which put a lot of pressure on the employees to increase their quota allocation and account creation. It has been proven that well-organized incentive programs are critical when it comes to the success of any team of employees. According to Kuvas et al., (2017), incentive programs can enhance performance by about 22 percent, and incentive programs can account for about 33 percent of sales.
The breakdown in corporate governance is further manifested in the failure of the senior management to furnish the employees in all the branches with the appropriate information on how to meet the expected sales quotas without succumbing to unethical practices. Creating a centralized system that is focused on the sales results without looking into the means that employees go through to achieve the results is detrimental to the success and reputation of an organization. In trying to take corrective measures, Wells Fargo now seeks to educate the employees’ impact of sales quotas as well as the incentives since they have a direct effect on the way the employees carry out their tasks (McCann & Wward, 2018). Wells Fargo has realized that whenever the incentives become too strict, the employees usually tend to act unethically. In case the employees are weak, they are less motivated to move out and perform to their level best. Wells Fargo is, therefore, trying to strike a balance to ensure the employees get the right information as well as the necessary sales incentive.
Delegate your assignment to our experts and they will do the rest.
Creating an incentive system without taking into consideration the comfort of the employees does not ultimately solve the problems of an organization. An organizational culture that inculcates core values, positive relations, and workplace incentives empower the employees to perform their duties. It is imperative for an employer to ensure that they treat their employees well to pre-empt employment lawsuits. An employment lawsuit may emanate from coercing employees to meet sales quotas at the expense of ethical or legal codes of conduct.
Corporate governance is the fabric of organizational growth and success. Effective managerial and policing strategies ensure that the employees stay motivated and act in accordance to the organization’s objectives and goals. An incentive system that promotes corruption and fraudulent activities depicts the ripple effect of a failed corporate governance. As a corrective measure, Wells Fargo has taken the initiative to give the right information to the employees as well as enhancing their incentives to ensure maximum performance. If these strategies are well implemented, the organization is likely to make a good reputation and perform better.
References
McCann, F., & Ward, S. (2018). Manageial Economics, 5 th Ed. Cengage Learning .
Kuvaas, B., Buch, R., Weibel, A., Dysvik, A., & Nerstad, C. G. (2017). Do intrinsic and extrinsic motivation relate differently to employee outcomes?. Journal of Economic Psychology , 61 , 244-258.
