Scandals can seriously ruin the reputation of businesses in a corporate world as well as among individuals. Most scandals often result in crippling of organizations and some lead to the collapse of business. Some organizations formulate positive strategies for dealing with scandals whereas others do end up benefiting from the negative publicity without taking up any measures.
Wells Fargo is one of the organizations that has faced a scandal which later worked to its advantage. Since 2012 to mid-2016, Wells Fargo personnel created so many fake accounts that generated a large amount of revenue for the company. The bank’s employees created approximately 2 million credit accounts without the consent of customers to meet the high targets set by the organization. Additionally, they also transferred funds to the new accounts triggering an overdraft fee and affecting the credit ratings of their customers (Duggan). Later in 2016, the serious acts of crime were revealed to the public, and the company was ordered to pay a large amount of penalty to make up for the damages made to consumers. The company faced handful investigations, lawsuits, and inquiries about the scandal.
As various analysts and agencies were analyzing the situation at Wells Fargo, the fortune magazine gave a well-elaborated explanation as what would have caused the frauds in the bank. The blame was put on the business strategy and the unrealistic goals set by the management. The employees of the company were working under immense pressure to meet targets and this created room for vulnerability in the bank’s system to achieve their goals (Duggan). By also praising the previous good history of the organization, the public was swayed making decisions concerning investing in the company’s stock. As much as the stock prices of the bank decreased after the scandal, it was able to shoot up after a short while since the scandal was neutralized by the mixed reactions from the various analysts. Those who took risks and still invested in the company’s stock largely benefited in a short while. The reaction of an organization faced with a scandal highly determines its impact on its future performance. There are chances that a company can end up profiting from a scandal just like Wells Fargo incident.
- Duggan, Kris. “How Wells Fargo Could Have Avoided Its Fake Accounts Scandal.” (2016).