The year 2017 was a spectacular failure for corporate governance. Many of the world's leading brands were caught up in brand-damaging severe scandals. Some of the biggest scandals involved Wells Fargo, Samsung, Uber, and United Airlines. While Wells Fargo was in the process of clearing its name from the 2016 fiasco of the fraudulent opening of bank accounts, more illegally opened accounts and unlawfully issued motor vehicle insurance policies were uncovered in 2017. On it part, Samsung was hit by a significant bribery accusation that led to the impeachment of the South Korean's President and the initiation of criminal charges against its then CEO. The online Taxi hailing company Uber Technologies Inc. (Uber) was not left behind either. A former employee accused one of its leading top management personnel of sexual harassment. Last, the United Airlines was caught up in a scandal involving kicking a passenger off a plane and injuring him. All these cases were damaging to the brand images of the above companies. Additionally, some of these company paid heavily in financial terms and led to leadership shakeups as well as firing/resignation of critical employees.
Wells Fargo Illegal Accounts and Insurance Policies
In 2011, reports came out that Wells Fargo's employees were engaging in fraudulent sales practices that involved opening fake bank accounts. The corporation's upper management downplayed them as a minor one-time issue (Premachandra & Filabi, 2018). But following the release of further media reports between 2013 and 2014, the leadership of Wells Fargo started taking the allegations seriously (Premachandra & Filabi, 2018). In 2015, Wells Fargo appointed consultants to look into the extent of the problem (Ochs, 2016 as cited in Premachandra & Filabi, 2018). In 2017, the company's woes intensified after additional unauthorized accounts were discovered. The prior investigation revealed Wells Fargo frontline employees had been involved in illegal cross-selling and enforcement activities, allegations which Wells Fargo has since admitted (Mims, 2017). The company agreed its employees had opened more than two million accounts for its customers without permission from clients, falsified banks records, forged customer signatures and contact details (Mims, 2017; (Premachandra & Filabi, 2018).). Also, Wells Fargo admitted to having manipulated or transferred funds between accounts to charge overdraft fees without its clients' consent (Premachandra & Filabi, 2018). This problem had several effects. First, over and above losing customer's confidence, the company had to settle for a fine of $185 million from federal regulators (Premachandra & Filabi, 2018). Second, about 1% of its employees were fired (Premachandra & Filabi, 2018). Last, the executive and CEO of community banking, Carrie Tolstedt, resigned and forfeited about $60 million in unvested recompense (Mims, 2017).
Samsung Heir Bribery Charge
In February 2017, Samsung's heir-apparent, Lee Jae-yong, was arrested on bribery indictments. Lee was accused of contributing $36 million to nonprofit organizations managed by a close friend of Park Guen-hye the former president of South Korea in exchange for political favors (Chun, 2017). In August, Lee Jae-yong was imprisoned for five years. The allegations were met with outrage that lead to removal from office of the form South Korean President. This scandal not only tarnished Samsung global image but also put the company in a precarious leadership situation after the resignation of the co-CEO Kwon Oh-hyun in October 2017 (Chun, 2017).
Uber's Sexual Harassment Allegations
No company was involved in as many unpleasant issues like Uber in 2017. The biggest scandal, though, was the accusation by the former Uber's software engineer, Susan Fowler (O'Malley, 2017). On February 19, 2017, Fowler revealed via a weblog that the company's management had ignored complaints by her and other female employees concerning rampant sexual harassment by managers (O'Malley). This revelation sparked widespread condemnation of the company and the resignation of Travis Kalanick the founder and CEO of Uber (O'Malley, 2017). Moreover, the law firm contracted by Uber to investigate the sexual harassment claims recommended the firing of 20 implicated employees (O'Malley, 2017). On top of the damage sustained by Uber internally, the coming to light of the sexual harassment culture at Uber created a ripple effect that subsequently cost many other tech-executives their jobs over sexual harassment allegations (O'Malley, 2017).
United Airlines Mishandling of a Passenger
The other corporate misdeed of 2017 was the forceful removal of a United Airlines' passenger from the company's airplane by two security officers. The plane had been overbooked and the passenger, who was injured in the scenario when his head hit an armrest, was removed against his will. Globally, consumers reacted in disbelieve and immediately called for a boycott (Winson, 2017). This incident caused United to lose millions of dollars in stock market cap. It also caused irreparable damage to the airline's brand (Winson, 2017).
Brand damaging scandals dominated the corporate airwaves in 2017. Many large corporations were implicated in disgraceful charges, which left their famous brands in shamble. Although many other companies found themselves in trouble like the one above, these selected cases were among the worst ones. The companies listed above have been picked because of the magnitude of the response their situations received from consumers worldwide, the financial cost a company suffered, and the significance of the effect they had on others companies, their brand images as wells as politics.
Chun, R. (2017, May 17). Samsung, shame, and corporate atonement. Retrieved from https://hbr.org/2017/05/samsung-shame-and-corporate-atonement
Mims, J. H. (20). The Wells Fargo scandal and efforts to reform incentive-based compensation in financial institutions. N.C. Banking Inst, 21(1), 429-467.
O'Malley, S. (2017, October 27). Workplace sexual harassment. CQ Researcher. Retrieved from http://library.cqpress.com/
Premachandra, B., & Filabi, A. (2017). Under pressure: Misconduct, leadership, and culture. Ethicalsystem.org.
Winston, A. (2017, April 12). Pepsi, United, and the Speed of Corporate Shame. Retrieved from https://hbr.org/2017/04/pepsi-united-and-the-speed-of-corporate-shame
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