BBM Business Ethics and Corporate Governance 1 — Questions and Answers
Question 1: Which ethical theory holds that the morality of an action is determined solely by its outcomes or consequences?
- Deontological ethics
- Virtue ethics
- Consequentialism (Correct answer)
- Social contract theory
Correct answer: Consequentialism
Consequentialism judges actions based solely on their results, with utilitarianism being the most common form that seeks the greatest good for the greatest number.
Question 2: A company's board of directors is responsible primarily to which group?
- Company employees
- Government regulators
- Shareholders (Correct answer)
- Local communities
Correct answer: Shareholders
The board of directors is elected by and legally obligated to represent the interests of shareholders, who are the owners of the corporation.
Question 3: What does the term 'Corporate Social Responsibility' (CSR) primarily refer to?
- A company's legal obligation to pay taxes
- A business model focused solely on profit maximization
- A company's commitment to ethical behavior and contributing to societal well-being (Correct answer)
- Government-mandated community service hours for employees
Correct answer: A company's commitment to ethical behavior and contributing to societal well-being
CSR refers to a business's voluntary commitment to operate ethically and contribute positively to society, the environment, and its stakeholders beyond legal requirements.
Question 4: Which of the following best describes a 'conflict of interest' in a business setting?
- Disagreement between two competing companies
- A situation where personal interests could improperly influence professional decisions (Correct answer)
- Legal disputes between employees and management
- Competition between departments for budget resources
Correct answer: A situation where personal interests could improperly influence professional decisions
A conflict of interest occurs when an individual's personal interests could compromise or appear to compromise their professional judgment and decision-making.
Question 5: The Sarbanes-Oxley Act (SOX) was enacted primarily to address which issue?
- Environmental pollution by corporations
- Corporate accounting fraud and investor protection (Correct answer)
- International trade disputes
- Employee workplace safety standards
Correct answer: Corporate accounting fraud and investor protection
The Sarbanes-Oxley Act of 2002 was enacted in response to major corporate scandals like Enron and WorldCom to improve financial disclosures and prevent accounting fraud.
Question 6: Which principle of corporate governance requires that managers be answerable for their use of company resources?
- Transparency
- Accountability (Correct answer)
- Fairness
- Responsibility
Correct answer: Accountability
Accountability in corporate governance means that management must answer to the board and shareholders for all decisions made regarding the use of company assets.
Question 7: A whistleblower in a corporate context is best described as someone who:
- Negotiates labor contracts on behalf of employees
- Publicly reports misconduct or illegal activity within an organization (Correct answer)
- Audits a company's financial statements externally
- Mediates disputes between executives and the board
Correct answer: Publicly reports misconduct or illegal activity within an organization
A whistleblower is an employee or insider who exposes unethical, illegal, or fraudulent activity within their organization, often to regulatory authorities or the public.
BBM Business Ethics and Corporate Governance 1
Which ethical theory holds that the morality of an action is determined solely by its outcomes or consequences?