You may have noticed that there is not a lot of discussion of ethics in
your textbook. A major reason is that from a financial view, if the
market or society values ethical behavior, unethical behavior by a
company will hurt its market value, thus defeating the goal of
maximizing shareholder value. Consider the case of Wells Fargo, which is
under fire for fraudulently creating up to 2 million deposit and credit
card accounts. In addition to the fines paid by the company, last week,
California announced that it was barring state transactions with Wells Fargo, including underwriting state bond issues. Today, Chicago announced
that it was divesting $25 million that it has invested with Wells Fargo
and next week Illinois plans to announce its plans to suspend Wells
Fargo from the state investment network. So, while Wells Fargo may have
temporarily increased value by fraudulent actions, these actions will
now negatively affect shareholder value.
