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<xTITLE>The Role of Ombudsmen and The Recurring Ethical Crisis in the American Financial Services Industry </xTITLE>

The Role of Ombudsmen and The Recurring Ethical Crisis in the American Financial Services Industry

by Alia Ismail
January 2017 Alia Ismail

In September 2016, Wells Fargo, a major financial institution of the US, fired over 5000 employees for misconduct, and issued 5 million dollars of customer refunds as a corrective action to unapproved cross-selling; opening new checking, savings, and credit card accounts for customers without their previously given consent[1]. This scandal has led lawsuits pertaining to various alleged violations (homeowners[2] and cars[3]) to surface successively, where more could be awaiting. As successive lawsuits and customer allegations continue to arise, it is wise to ask: Where does the problem stem from and how do we get such issues resolved effectively? 

Because of that September crisis, Wells Fargo CEO was investigated[4] and asked to step down[5]. In addition, several states (California[6], Illinois[7] and Ohio[8]) froze activity with the San Francisco based bank. However, having 5000 employees laid off, is not a solution to the problem as the amount of authority given to employees usually is limited where their behaviors are often a result to a lack of a solid code of conduct training on part of the organization. Employees should be the last target, where only ones of severe ethical violations should be put into question. Firing employees only violates employee rights.

Working in an unethical and highly competitive environment will more likely cause psychological pressure to employees because of their constantly threatened financial security. Being met with aggressive organizational goals, employees might not have a clear vision as to how to arrive successfully at their targets in an ethical way. When encouraged to act unethically, many often the atmosphere does not encourage reporting concerns even when the code of conduct is clear and when violations are clearly detected and witnessed.

In the Wells Fargo situation, very basic trainings to staff, inclusive of awareness to customer rights, shareholder rights and employee rights, should be put in place to keep employees first aware and second safe. Under the light of their trainings, employees should be able to voice certain concerns as they see necessary. A leeway to suspected violations is equally if not more  important than a leeway to clearly witnessed violations. Allowing voice to suspected violations not only would encourage an atmosphere of ethical education where employees learn to distinguish between what’s wrong and what’s right, but also would serve as a guide to management since those show symptoms to possibly emerging unethical behaviors.

A comfortable space for employees should be created in each organization, where an ombudsman would be present to hear concerns and ensure an ethical implementation of activity is taking place. A system of “voicing concerns” should go hand in hand along with a system of sanctions. An ombudsman person should be responsible to research the legitimacy of an employee concern and, if grounded, discuss with management possible alternatives to suspected practices that do not conflict with ethics or threaten employee security.

Higher ups should constantly feel called upon by employees at the bottom, though not necessarily directly but through a dedicated neutral third party. A system of accountability cohesive to employee supervision is highly effective. This just would create both, a teamwork spirit and a balanced system where the ones at the top are equally accountable to the ones at the bottom, just as the ones at the bottom are accountable to the ones at the top.

By creating an ombudsman office unhealthy behaviors could be contained in a timely manner before issues and unethical behaviors grow into scandals. While possible sanctions could deter management from possible wrongdoings, the availability of an unethical culture where unethical behaviors would thrive could make unethical behaviors grow exponentially. When employees do not understand their rights, the rights of other people at stake, nor have the freedom to speak, they would not only put their job security at stake but will encourage the higher ups to unhealthy behaviors and a possibility to a system abuse. 

No real conflict has to happen for such an ombudsman to receive an employee, as the role of an ombudsman does not have to be limited to mediating conflict, as traditionally known. If concerns about a certain manager practices become frequent, the ombudsman could notify the person at question. A certain amount of opportunity to amend should be given to management. Since an ombudsman is supposed to report to CEOs, CEOs could then warn or fire staff causing unethical behaviors. Shareholders should have access to the ombudsman office information as well. This way CEOs will feel watched and accountable towards shareholders as well. This would be a way where unethical CEOs get questioned and may be fired, instead of allowing things to deteriorate until calls of sending them to jail arise.

In the Wells Fargo example, creating a new compensation system is something management reported they have started to work on[9]. After calls from senators for a Department of Labor investigation of fair labor treatment[10], the Department of Labor started investigations, as some employees reported they’ve been fired after complaining about certain ethical violations they witnessed which they refused to approve[11]. Post those investigations, the new CEO have vowed to encourage the use of an “800” ethics line[12]. However, the creation of an ombudsman office seems to be the most viable solution as it directly addresses concerns and creates a locally safe space for staff to directly speak rather than having to report remotely to people on the other side of the line and may be the other side of the country. Having a dedicated person, will not only give staff the desired comfort to speak up, but will increase the chance to an effective resolution to problems.

CEOs and organizations are more in need of constant reminders than to be remotely threatened by the possibility of jail. Creating a system that embraces the role of ombudsmen would encourage an environment of trust and accountability (to both employees and management), rather than fear and punishment, where employees would feel empowered, and CEOs would  feel relatively guided by employees.

New laws should be legislated by congress where it becomes a requirement that each financial institution creates an ombudsman office where the department of labor would ensure and oversee its activity. Creating an outlet for employees to voice perceived or suspected violations not only will help with employee protection, but also with customer protection, shareholder protection and ironically, CEO protection.


[1]Sweet, K. (2016, September 8). Wells Fargo fined $185 million for improper account openings. Associated Press. Retrieved from

[2] Henry, J. (2016, October 30).  Wells Fargo Troubles Go Beyond Fake Account Scandal. Forbes. Retrieved from

[3] Aubin, D. (2016, October 31).  Wells Fargo agrees to $50 million settlement over homeowners fees. Reuters. Retrieved from

[4]Cowley, S. (2016, September 29). Wells Fargo’s Reaction to Scandal Fails to Satisfy Angry Lawmakers . New York Times. Retrieved from

[5] Gonzales, R. (2016, October 12). Wells Fargo CEO John Stumpf Resigns Amid Scandal. NPR. Retrieved from

[6] Corkery, M. & Cowley, S. (2016, September 28). California Suspends Ties With Wells Fargo. Chicago Tribune. Retrieved from

[7] Yerak, B. (2016, October 3). Illinois treasurer: State will suspend Wells Fargo business. Chicago Tribune. Retrieved from

[8] Sweet, K. (2016, October 14). Ohio to suspend doing business with Wells Fargo. Associated Press. Retrieved from

[9] Biers, J. (2016, September 13). Embattled Wells Fargo revises employee pay system. Yahoo Finance. Retrieved from

[10] Blake, P. (2016, September 22). Senators Ask Labor Department to Investigate Wells Fargo Over Accounts Scandal.  ABC NEWS. Retrieved from

[11]Bowen, B. (2016, September 30). U.S. Department of Labor Investigating Wells Fargo for Potential Unpaid Overtime Violations and Employee Whistleblower Retaliation, Baron & Budd Reports. Business Wire. Retrieved from

[12] Roberts, D. (2016, November 11). Some at Wells Fargo say they fear using ethics line, even as bank vows to fix it. Charlotte Observer. Retrieved from


Alia Ismail is an independent dispute resolution professional. She is a non-lawyer mediator and a formerly California licensed financial advisor. Possess a consistent and successful track record for closing deals within the environmental health (Lebanon), financial services (US) and education (US) industries. While in school, and as part of getting trained, mediated and dismissed a few cases at Los Angeles Superior court.

Possess primary local (formerly Lebanon, and latterly US) and secondary international (Europe) education in public administration, business and dispute resolution. Holds an MBA and an MDR from Pepperdine University, a certificate in global enterprise management from Oxford, and a Bachelor’s of Arts in Public Administration from the American University of Beirut.

In the process of establishing a Beirut-based American Lebanese cross-border mediation center to regulate mediation activity within the Middle East, and between the Middle East and the US. Besides mediating commercial disputes, developing a private practice in cultural transformation to instill a culture of ethics and protect the human rights of employees within organizations.

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