FINAN 4300 Problem Set 10

The slogan Eight is Great was a general branding line with no link to employee compensation or daily sales pressure

False

The slogan Eight is Great was not just a marketing tagline; it was tied directly to branch sales targets and compensation systems, creating relentless daily pressure on employees to cross -sell products.

The creation of more than two million unauthorized accounts at Wells Fargo demonstrates how misconduct can become systemic rather than isolated to a few “bad apples”

True

With over two million unauthorized accounts and misconduct repeated across thousands of branches, the issue was systemic and cultural, not the fault of a handful of rogue employees

Whistleblowers at Wells Fargo were consistently protected by management and their concerns led to swift corrective action.

False

Whistleblowers were often ignored or punished, with some losing their jobs or being demoted, which shows management failed to act on internal warnings.

According to the Fraud Triangle, Wells Fargo’s sales culture primarily reflects the opportunity corner rather than pressure.

False

The most dominant corner of the Fraud Triangle at Wells Fargo was pressure, stemming from unrealistic sales targets, though opportunity and rationalization also contributed

The Wells Fargo board’s HR/Compensation Committee played no role in reinforcing toxic incentive structures.

False

The HR/Compensation Committee approved pay plans that heavily rewarded cross-selling, embedding the toxic incentive structure into the organization.

Wells Fargo was the only U.S. bank ever placed under a Federal Reserve asset cap due to governance and cultural failures

True

Wells Fargo remains the only U.S. bank ever placed under a Federal Reserve asset cap, a sanction meant to freeze growth until governance and cultural reforms were proven.

John Stumpf resigned as CEO immediately after his Senate Banking Committee hearing in September 2016.

False

John Stumpf appeared at the Senate Banking Committee hearing in September 2016 but resigned weeks later in October, under escalating political and shareholder pressure.

Comparisons with Citi, U.S. Bank, and Fifth Third suggest that unauthorized account scandals were common in the industry, but Wells Fargo s was distinguished by its scale and systemic nature.

True

Other banks had smaller unauthorized account cases, but Wells Fargo s scandal stood out for its massive scale, systemic culture, and visibility in national politics and media.

PR campaigns such as Re -Established. 1852. are sufficient by themselves to restore trust in a damaged banking brand

False

Advertising campaigns like Re -Established. 1852 were part of the trust - rebuilding effort, but PR alone cannot repair deep reputational damage without structural reforms and accountability.

The Wells Fargo case demonstrates that reputational damage can outlast financial penalties and continue to constrain business years later.

True

Wells Fargo’s reputational damage has persisted well beyond fines, with trust levels, customer satisfaction, and regulatory oversight continuing to constrain the bank years after the scandal.

Which of the following best describes the Eight is Great initiative?

A campaign encouraging eight cross-sold products per household

Which of the following BEST explains why Wells Fargo’s misconduct became systemic rather than isolated?

Toxic sales incentives combined with normalized misconduct

Which corner of the Fraud Triangle is best illustrated by daily “Motivator Calls” and threats of firing for missing sales goals?

Pressure

Which U.S. regulatory body was part of the $185 million settlement announced in September 2016?

OCC

Senator Elizabeth Warren’s questioning of John Stumpf in 2016 most forcefully accused him of:

Gutless leadership and failure to resign or claw back pay

In 2018, the Federal Reserve imposed a sanction unique in U.S. banking history on Wells Fargo. What was it?

Capping total assets at 2017 levels until reforms were complete

Which of the following was NOT an action Wells Fargo took in response to the scandal?

Complete replacement of the entire board of directors in 2016

Compared to other banks (Citi, U.S. Bank, Fifth Third), Wells Fargo was unique in that:

It faced the largest scale of fake accounts and a Federal Reserve asset cap

Which Wells Fargo CEO resigned in March 2019 under regulatory and political pressure?

Tim Sloan

In Simons’ Levers of Control framework, Wells Fargo’s obsessive focus on cross-sell metrics illustrates failure in which lever?

Diagnostic Controls

The Wells Fargo board’s HR/Compensation Committee failed primarily by:

Approving incentive plans that rewarded aggressive cross-selling

Customers were harmed by the fake accounts scandal primarily through:

Unauthorized fees and damage to credit scores

Wells Fargo launched advertising campaigns like “Re-Established. 1852” after the scandal. Which critique best fits?

PR campaigns alone cannot rebuild trust without substantive reforms

Which statement best reflects the challenge of restoring trust once lost?

Reputational damage often lingers for years, even after reforms

Why did Wells Fargo become the most prominent example of fake account scandals, even though peers like Citi and Fifth Third had smaller cases?

Its scale (millions of accounts), systemic culture, and visibility made it a symbol