How Can You Use Leadership to Prevent Legal Disasters for Your Organization?

Jane G. Davis, Esquire
General Counsel,
Pennsylvania Restaurant & Lodging Association

As a woman attorney, I have an interest in following stories about prominent women business executives. A few months ago I saw a reference to an article about Sheryl Sandberg, the Chief Operating Officer of Facebook, that appeared in Vanity Fair. Going online, I found “The Miseducation of Sheryl Sandberg” by Duff McDonald (Vanity Fair, 11/27/18).

Reading the article, which discussed the multitude of problems Facebook has encountered, I realized it was less a criticism of Sheryl Sandberg’s leadership than of the Harvard Business School from which she graduated and the approach to leadership business schools in this country generally take. To quote from the article: “The truth is, Harvard Business School, like much of the M.B.A. universe in which Sandberg was reared, has always cared less about moral leadership than career advancement and financial performance.”

The article quoted Jeff Skilling, a Harvard Business School graduate and convicted felon after the Enron debacle, as saying in a class that he didn’t feel a business executive had an obligation to stop making and selling a defective product and that “it’s the government’s job to step in if the product is dangerous.” Unfortunately, what went unrecognized there is the fact that, when the government has to step in, the results are very often less than optimal for the organization.

When I think about an organization that seems to be emblematic of the problem of American business executives not providing appropriate moral leadership to keep their organization out of trouble, Wells Fargo comes to mind. Watching Wells Fargo in recent years has been to witness episode after episode of breaches of customer trust. In 2016, it was revealed that over 5,000 Wells Fargo employees had been involved in establishing phony accounts in customers’ names, numbering in the millions, in order to meet aggressive sales targets; this resulted in short-term profits and customers incurring unnecessary fees and other costs.

After the scandal over these accounts erupted, the CEO was forced out and was replaced by a veteran employee who was charged with cleaning up the operation and changing the corporate culture. The company has paid, to date, $1.5 billion in fines and penalties and $620 million to settle lawsuits from customers and shareholders. The Federal Reserve has put restrictions on the bank’s ability to grow until it cleans its house. More penalties and lawsuits are likely since additional areas of misconduct have come to light. In late March, the replacement CEO resigned, and Wells Fargo is looking for a new leader from outside the bank.

The New York Times has reported that, in a survey of over 27,000 Wells Fargo employees, one of the top concerns was whether the bank conducts its business activities with honesty and integrity and that angry comments have appeared on its internal blog about its leaders’ “doublespeak.” It appears that for any new CEO to be successful in rescuing Wells Fargo, that person is going to have to show strong moral leadership and lead by doing, not just talking. He or she will need to emphasize not only short-term financial performance, but also build long-term relationships with customers by doing the right thing.

It has been my experience in working with numerous businesses that employees are very much tuned in to what the people at the top really value in terms of their performance. All the compliance programs in the world will likely not keep a company out of trouble if its leaders send signals that they want certain things at any cost. They can expect that they will get the desired result, but it may well be to the detriment of the organization—turning into one of those situations where people stop and say: “What were they thinking?” Employees who believe their leaders have moral standards and expect the organization to demonstrate that are likely to act in a manner that benefits it in the long term. •

If you have any questions concerning this particular subject, please contact Jane G. Davis, Esquire at ( or 717-848-5134.