The Normalization of Corruption and Wells Fargo’s 2 Million False Accounts

14040090880_7ba42ec582_z[We’re pleased to welcome J.S. Nelson, Senior Fellow at the Zicklin Center for Business Ethics Research at Wharton, and an Advisor in the Center for Entrepreneurial Studies at the Stanford Graduate School of Business. Nelson recently published an article in the Journal of Management Inquiry entitled “The Normalization of Corruption.” From Nelson:]

My paper in the Journal of Management Inquiry’s upcoming special issue on corruption describes how corruption becomes a new norm across individuals, companies, and then industries. Entitled “The Normalization of Corruption,” the paper relies on findings from law, organizational behavior, and surveys of the workplace to describe the norm in terms of behavioral ethics, how it reproduces, and how it grows.

The discussion focuses on how the normalization of corruption is built by individuals, spreads to companies, and then to industries. It further describes how the very normalization of the corruption protects individuals singled out for their misconduct from punishment by the legal system.

The specific examples in the paper are taken from the financial industry and the 2015-16 Volkswagen emissions scandal. This week’s headlines about widespread fraud at Wells Fargo follow the same patterns: cheating became the norm at Wells Fargo because of intense pressure from top executives; those top executives deny personal responsibility; and the legal system gives us few options to prosecute them for behavior that is otherwise widespread. Systemic fraud ensues.  Wells Fargo created over 2 million unauthorized accounts for customers, charged at least $1.5 million in unwarranted fees for those sham accounts, and over 5,300 employees were involved.

Similar to the social pressures that fueled the 2007-08 financial crisis, managers inside Wells Fargo pushed their employees to lie, cheat, steal, and to bend the rules in any imaginable way to satisfy sales goals and make profit. Employees were told to sign up their mothers, siblings, and friends; instructed to hunt for sales at bus stops and retirement homes;and often targeted elderly clients and people who did not speak English well.When employees protested that “This doesn’t make sense” and “Where are you getting these sales goals?”managers would answer, “No, you can do it”or “You’re negative”or “Oh, you’re not a team player.”Ethical employees who reported to hotlines and through the chain of command were fired for insubordination. Wells Fargo human resources personnel admit that the bank had a playbook for watching any employees who reported and then finding ways to fire them for another reason.

Now the bank faces the growing threat of a private class action lawsuit by ethical employees who were fired, and two top executives will have parts of their pay clawed back by the company’s disgraced board. But the rest of the legal system appears paralyzed to effectively enforce consequences on key individuals.

How did we arrive at this point of broadly corrupt norms? And more importantly, how do we turn around a system that has normalized corruption? The “Normalization of Corruption” JMI paper delves into these questions with immediate application for today.

[Please look for the follow-up entry this week on the origin of the paper, “The Normalization of Corruption.”]

Want to stay current on all of the latest research published by the Journal of Management Inquiry? Click here for sign up for e-alerts!
*Wells Fargo Image attributed to Mike Mozart (CC).
This entry was posted in Academy of Management, Business, Crisis Management, Employees, employers, Jobs, Labor, organizational justice by Cynthia Nalevanko, Editor, SAGE Publishing. Bookmark the permalink.

About Cynthia Nalevanko, Editor, SAGE Publishing

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 1500 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, Washington DC, and Melburne, our publishing program includes more than 1000 journals and over 900 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

One thought on “The Normalization of Corruption and Wells Fargo’s 2 Million False Accounts

  1. Pingback: Decisions and habitual dishonesty | Higher EDge

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s