The Short Arm Of The Claw Case Study

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Introduction On September 26, 2016 Bloomberg Business weekly magazine published “The Short Arm of the Claw article. In the article, recent reports show that Wells Fargo employees created two million unauthorized accounts to meet sales quotas. It is believed that many executives may have profited from the unethical transactions which clawback policies and law are forced to recoup compensation after misconduct. Due to the financial scandal over 5,000 lower-level employees were fired, however; there are reasons to believe that executives have made millions of dollars from the fraudulent accounts. In Chapter 8, we discussed traditional goal setting which is goals set by top managers flown down through the organization which become subgoals for …show more content…
The planning process is used to provide direction, reduce uncertainty, minimize waste and redundancy, and set standards for controlling. Like many financial institutions, Wells Fargo stated goals are to gain loyal customers, revenue, and manage expenses. In actuality financial institutions real goals are to maximize investments and grow profits. The operational plan for the community bank were for employees to meet sales target which expedited to unethical behavior from employees. The plan withheld a specific target sales in which the community bank were responsible for attaining to meet the companies overall financial goals. Many companies use the traditional goal setting strategy which requires top-level management to create goals that are flown down to lower-level management. Top-level management set the goals but throughout the means-end chain the message sometimes get filtered and need to be operationalized. In this situation, Wells Fargo Board of Directors wanted to maximize their company overall profits and investments. However, the Divisional manager’s were focused on improving each community bank division profits. Furthermore, department managers were assigned specific target sales to attain which transported to lower- level employees in which they wanted to quickly increase profits. Because the formal planning department emphasized the importance of attaining strategic goals the lower level performance employees took advantage of shortcuts. In the “Managing Social Responsibility and Ethics” chapter we discussed ethical behavior. Every company complies to a code of ethics which is a formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.Wells Fargo Clawback policies and other laws which are apart of ethics allow executive compensation to be recouped after misconduct is revealed. Because the massive

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