Can honesty be rewarded at banks?

Honesty is not only its own reward. It can also work wonders in cleaning up the financial industry.

At Wells Fargo bank, the honesty of some employees led them to oppose – and then expose – a deceptive practice that had lasted for years at the bank: the fraudulent opening of deposit and credit-card accounts for customers without their knowledge.

By sticking to their principles despite pressure to show they had sold new products, these employees have helped awaken Americans and regulators to two important tasks: Banks must make sure they hire people of high integrity and also ensure employees have a safe outlet to report wrongdoing.

Much of the debate about the Wells Fargo scandal has rightly focused on whether to punish top managers, how to make amends to customers who suffered financially, and how to improve the bank’s ability to manage risks to its operations. Yet at a Sept. 20 hearing before Congress, regulators admitted they face an uphill battle to help create an ethical culture within banks.

Ethical codes are not enough. Simply holding banks accountable for deceit or harmful incentives is not enough. And in Wells Fargo’s case, even having an anonymous tip line for employees to an outside party was not enough.

Somehow banks must hire, train, and encourage workers with high moral reasoning. An affirmative culture is far better than a defensive one. At the hearing on Capitol Hill, Sen. Tim Scott (R) of South Carolina suggested to John Stumpf, the chairman and chief executive officer of Wells Fargo, that the bank must empower employees to come forward if they spot dishonesty. Examples of such honesty, he said, can work as a model for others in the industry to do things right.

Better yet, as part of its internal reform, Wells Fargo can ask those employees who challenged the unethical culture to share what motivated them not to participate. The pressure from management to open multiple accounts for existing customers was high. But the employees’ own standards were able to withstand such pressure and, in many cases, push them to work for change. Many of them went to court, to the press, and to regulators to seek reform.

Wells Fargo has ended the compensative incentives for workers to open new accounts. Yet banks in general may still fall into the trap of reaching for profits at the expense of customers and the integrity of employees. The best guard against such lapses is a vigilance to find and reward honesty in the nation’s 1.7 million bank workers.