The Wells Fargo Crisis

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Fgrcuc

Economics

Description

Look at the principle-agent problem and what when wrong at Wells Fargo.

1. What about the incentive system resulted in massive creation of fake accounts by the retail operation?

2. Why did it only get worse from there?

Refer to Froeb's rule from text Chapter 1 page 8..."Avoid the temptation to think about the problem from the employee's point of view...

3. How does the organization give employees enough information to make good decisions and the incentives to do so?"

Additional resource given: https://www.fool.com/investing/2017/05/06/warren-b...


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Explanation & Answer

Attached.

Running head: THE WELLS FARGO CRISIS

The Wells Fargo Crisis
Name
Institution
Date

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THE WELLS FARGO CRISIS

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Introduction

The crisis at Wells Fargo refers to a case whereby the employees of the bank participated
in the creation of fake customer’s accounts in order to benefit from the bonuses and other
monetary incentives offered by the bank. The start of this crisis began when the bank started
offering bonuses to its workers in relation to the number of new customer accounts that they
opened. As such, in order to cash in on the bonuses, the incentive system resulted in the massive
creation of fake accounts by the retail operation, a professional abuse of ethics that went on for
years under the noses of the executives (Maxfield, 2017). In fact, despite knowing the ongoing
malpractice at the b...


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