Moral Emotions

Moral emotions are the feelings and intuitions that play a major role in most of our ethical decision making and actions.

Discussion Questions 1. Not all scientists agree that emotions play as large a role in moral judgments as is painted in this video. What do you think? Why?

2. Can you think of a time when you were a victim of “moral dumbfounding”—you jumped to a moral conclusion that you could not logically defend? Explain?

3. Which of the self-conscious emotions–guilt, shame, or embarrassment—do you think is the most important? Why?

4. How would you describe the difference between sympathy and empathy?

5. Can you think of a scenario in which the disgust emotion has led someone astray when they made a moral judgment? Feel free to include yourself.

6. Many people believe that empathy is the most influential of all the moral emotions. If it is, which emotion would you believe is the second most influential?

Case Studies Wells Fargo and Moral Emotions

On September 8, 2016, Wells Fargo, one of the nation’s oldest and largest banks, admitted in a settlement with regulators that it had created as many as two million accounts for customers without their permission. This was fraud, pure and simple. It seems to have been caused by a culture in the bank that made unreasonable demands upon employees. Wells Fargo agreed to pay $185 million in fines and penalties.

Employees had been urged to “cross-sell.” If a customer had one type of account with Wells Fargo, then top brass reasoned, they should have several. Employees were strongly incentivized, through both positive and negative means, to sell as many different types of accounts to customers as possible. “Eight is great” was a motto. But does the average person need eight financial products from a single bank? As things developed, when employees were unable to make such sales, they just made the accounts up and charged customers whether they had approved the accounts or not. The employees used customers’ personal identification numbers without their knowledge to enroll them in various products without their knowledge. Victims were frequently elderly or Spanish speakers.

Matthew Castro, whose father was born in Colombia, felt so bad about pushing sham accounts onto Latino customers than he tried to lessen his guilt by doing volunteer work. Other employees were quoted as saying “it’s beyond embarrassing to admit I am a current employee these days.”

Still other employees were moved to call company hotlines or otherwise blow the whistle, but they were simply ignored or oftentimes punished, frequently by being fired. One employee who sued to challenge retaliation against him was “uncomfortable” and “unsettled” by the practices he saw around him, which prompted him to speak out. “This is a fraud, I cannot be a part of that,” the whistleblower said.

Early prognostications were that CEO John Stumpf would not lose his job over the fiasco. However, as time went on and investigations continued, the forms and amount of wrongdoing seemed to grow and grow. Evidence surfaced that the bank improperly changed the terms of mortgage loans, signed customers up for unauthorized life insurance policies, overcharged small businesses for credit-card processing, and on and on.

In September of 2016, CEO Stumpf appeared before Congress and was savaged by Senators and Representatives of both parties, notwithstanding his agreement to forfeit $41 million in pay. The members of Congress denounced Wells Fargo’s actions as “theft,” “a criminal enterprise,” and an “outrage.” Stumpf simultaneously took “full responsibility,” yet blamed the fraud on ethical lapses of low-level bankers and tellers. He had, he said, led the company with courage. Nonetheless, by October of 2016 Stumpf had been forced into retirement and replaced by Tim Sloan.

Over the next several months, more and more allegations of wrongdoing arose. The bank had illegally repossessed cars from military veterans. It had modified mortgages without customer authorization. It had charged 570,000 customers for auto insurance they did not need. It had ripped off small businesses by charging excessive credit card fees. The total number of fake accounts rose from two million to 3.5 million. The bank also wrongly fined 110,000 mortgage clients for missing a deadline even though the party at fault for the delay was Wells Fargo itself.

At its April 2017 annual shareholders meeting, the firm faced levels of dissent that a Georgetown business school professor, Sandeep Dahiya, called “highly unusual.”

By September, 2017, Wells Fargo had paid $414 million in refunds and settlements and incurred hundreds of millions more in attorneys’ and other fees. This included $108 million paid to the Department of Veterans Affairs for having overcharged military veterans on mortgage refinancing.

In October 2017, new Wells Fargo CEO Tim Sloan was told by Massachusetts Senator Elizabeth Warren, a Democrat, that he should be fired: “You enabled this fake-account scandal. You got rich off it, and then you tried to cover it up.” Republicans were equally harsh. Senator John Kennedy Texas said: “I’m not against big. With all due respect, I’m against dumb.”

Sloan was still CEO when the company had its annual shareholders meeting in April 2018. Shareholder and protestors were both extremely angry with Wells Fargo. By then, the bank had paid an additional $1 billion fine for abuses in mortgage and auto lending. And, in an unprecedented move, the Federal Reserve Board had ordered the bank to cap its asset growth. Disgust with Wells Fargo’s practices caused the American Federation of Teachers, to cut ties with the bank. Some whistleblowers resisted early attempts at quiet settlements with the bank, holding out for a public admission of wrongdoing.

In May 2018, yet another shoe dropped. Wells Fargo’s share price dropped on news that the bank’s employees improperly altered documents of its corporate customers in an attempt to comply with regulatory directions related to money laundering rules.

Ultimately, Wells Fargo removed its cross-selling sales incentives. CEO Sloan, having been informed that lower level employees were suffering stress, panic attacks, and other symptoms apologized for the fact that management initially blamed them for the results of the toxic corporate culture, admitting that cultural weaknesses had caused a major morale problem. Discussion Questions:

1. What moral emotions seem to have been at play in this case? On the part of the bank’s employees? The bank’s victims? The bank’s regulators? The bank’s shareholders?

2. What factors contributed particularly to the outrage and anger that legislators, regulators, customers, and shareholders felt?

3. Clearly inner-directed emotions such as guilt and embarrassment affected the actions of Wells Fargo employees. Were they always sufficient to overcome the employees’ utilitarian calculation: “I need this job”?

4. Did moral emotions motivate some of the whistleblowers? How?

5. In the wake of everything described in the case study, Wells Fargo has fired many employees, clawed back bonuses from executives, replaced many of its directors, dismantled its sales incentive system and made other changes. Do you think these changes were made out of a utilitarian calculation designed to avoid further monetary penalties, a desire to avoid the shame and embarrassment the bank’s managers and employees were feeling, or a combination of both? If a combination, which do you think played a bigger role? Why? Bibliography

“Elizabeth Warren to Wells Fargo CEO: “You Should Be Fired,” http://money.cnn.com/2017/10/03/investing/wells-fargo-hearing-ceo/index.html “It’s Been a Year Since the Wells Fargo Scandal Broke—and New Problems Are Still Surfacing,”

http://www.latimes.com/business/la-fi-wells-fargo-one-year-20170908-story.html “Wells Fargo’s Reaction to Scandal Fails to Satisfy Angry Lawmakers,” https://www.nytimes.com/2016/09/30/business/dealbook/wells-fargo-ceo-john-stumpf-house-hearing.html “’Wells Fargo, You’re the Worst’: Scenes from Testy Annual Meeting,”

https://www.americanbanker.com/news/wells-fargo-youre-the-worst-scenes-from-testy-annual-meeting “How Wells Fargo’s Cutthroat Corporate Culture Allegedly Drove Bankers to Fraud,”

https://www.vanityfair.com/news/2017/05/wells-fargo-corporate-culture-fraud “Outburst by Angry Wells Fargo Shareholder Halts Annual Meeting,”

http://money.cnn.com/2017/04/25/investing/wells-fargo-shareholder-meeting/index.html “Wells Fargo Shares Slip on Report that Employees Altered Customer Documents in Its Business-Banking Unit,”

https://www.cnbc.com/2018/05/17/wells-fargo-shares-sink-on-report-that-employees-altered-customer-documents-in-its-business-banking-unit.html “Wells Fargo to Pay $108 Million for Allegedly Overcharging Veterans on Refis,”

https://www.housingwire.com/articles/40925-wells-fargo-to-pay-108-million-for-allegedly-overcharging-veterans-on-refis “For Wells Fargo, Angry Questions About Profiling Latinos,”

http://www.chicagotribune.com/business/ct-wells-fargo-fake-accounts-latinos-20161019-story.html “More Former Wells Fargo Employees Allege They Were Fired After They Tried to Blow the Whistle on Shady Activity at the Bank,”

http://money.cnn.com/2017/11/06/investing/wells-fargo-retaliation-whistleblower/index.html “Inside Wells Fargo, Workers Say the Mood is Grim,”

http://money.cnn.com/2016/11/03/investing/wells-fargo-morale-problem/index.html “Disgust With Wells Fargo You Can Take to the Bank,”

https://goodmenproject.com/business-ethics-2/disgust-with-wells-fargo-you-can-take-to-the-bank-wcz/ “The Former Khmer Rouge Slave Who Blew the Whistle on Wells Fargo,”

https://www.nytimes.com/2018/03/24/business/wells-fargo-whistleblower-duke-tran.html

Teaching Notes The Moral Emotions video in our Concepts Unwrapped series is an important one because people make most of their moral judgments and action decisions intuitively (System 1) rather than following great cognitive effort (System 2).

It seems to us that we make our moral decisions rationally, so it can be very difficult for people to grasp the true reality. One way to make a little progress in convincing people of the role that emotions play in their decision making is to explore the notion of moral dumbfounding. The work of Joshua Greene (Moral Tribes 2013), Jonathan Haidt (The Righteous Mind 2012), and others helps.

One approach is present students with factual scenarios which will trigger their disgust emotion, but do not involve harm to any victims. The triggering of their disgust emotion will tend to lead them to conclude that the action is immoral, but they will falter when asked to come up with a logical reason why that is the case. Here are two unpleasant but effective examples borrowed from the work (and vivid imagination) of others:

• Tom, a 16-year-old, was left home alone by his parents as they visited relatives out of town. He went to the local grocery store, bought some lotion, and took it home and masturbated with it. Did Tom act immorally?

• Rex and Sarah were brother and sister, both in their late 20s. They had always been close. One evening after they watched a movie in Rex’s apartment, they decided to have sexual relations, reasoning that it would make their relationship even closer and more special. They took all necessary precautions. They never chose to have sex again. Did they act immorally?

Another way to illustrate moral dumbfounding is to ask half the class their opinion on one of the following “trolleyology” scenarios and the other half to opine on the other. Typically, they will give very different answers even though the big picture result (killing one person in order to save five) is the same. The students will have great difficulty explaining rationally why most people say it is moral for Denise to act, but most will say it is not moral for Frank to do so. The best explanation is, indeed, an emotional one.

• Denise is standing beside a switching lever near tracks when she sees an out-of-control trolley. The conductor has fainted and the trolley is headed toward five people walking on the track; the banks are so deep that they will not be able to get off the track in time. The track has a side track leading off to the left, and Denise can flip the switch and turn the trolley on to it. There is, however, one person on the left-hand track. Denise can turn the trolley, killing the one; or she can refrain from flipping the switch, letting the five die. Is it morally permissible for Denise to flip the switch, turning the trolley onto the side track?

• Frank is on a footbridge over trolley tracks. He knows trolleys and can see that the one approaching the bridge is out of control, with its conductor passed out. On the track under the bridge, there are five people; the banks are so steep that they will not be able to get off the track in time. Frank knows that the only way to stop an out-of-control trolley is to drop a very heavy weight into its path. But the only available, sufficiently heavy weight is a large person also watching the trolley from the footbridge. Frank can shove the large person onto the track in the path of the trolley, resulting in his death; or he can refrain from doing this, letting the five die. Is it morally permissible for Frank to push the large person onto the tracks?

The field of “trolleyology” has gotten a little crazy, but Thomas Cathcart’s The Trolley Problem (2013) and David Edmonds’ Would You Kill the Fat Man? (2014) are two helpful and accessible books on the topic.

Additional Resources The latest teaching resource from Ethics Unwrapped is an article, written by Cara Biasucci and Robert Prentice, that describes the basics of behavioral ethics, introduces the videos and supporting materials along with teaching examples, and includes data on the efficacy of Ethics Unwrapped for improving ethics pedagogy across disciplines. It was published in Journal of Business Law and Ethics Pedagogy (Vol. 1, August 2018), and can be downloaded here: “Teaching Behavioral Ethics (Using “Ethics Unwrapped” Videos and Educational Materials).”

For more resources on teaching behavioral ethics, an article written by Ethics Unwrapped authors Minette Drumwright, Robert Prentice, and Cara Biasucci introduces key concepts in behavioral ethics and approaches to effective ethics instruction—including sample classroom assignments. The article, published in the Decision Sciences Journal of Innovative Education, may be downloaded here: “Behavioral Ethics and Teaching Ethical Decision Making.”

A detailed article by Robert Prentice with extensive resources for teaching behavioral ethics, published in Journal of Legal Studies Education, may be downloaded here: “Teaching Behavioral Ethics.”

An article by Robert Prentice discussing how behavioral ethics can improve the ethicality of human decision-making, published in the Notre Dame Journal of Law, Ethics & Public Policy, may be downloaded here: “Behavioral Ethics: Can It Help Lawyers (And Others) Be their Best Selves?”

A dated but still serviceable introductory article about teaching behavioral ethics can be accessed through Google Scholar by searching: Prentice, Robert A. 2004. “Teaching Ethics, Heuristics, and Biases.” Journal of Business Ethics Education 1 (1): 57-74.