BBM Business Ethics and Corporate Governance 3

Question 1

What is the primary purpose of an independent audit committee within a corporation's board?

Accepted Answer

To oversee the financial reporting process and ensure integrity of financial statements

Answer

To develop the company's annual marketing plan

Answer

To set executive compensation packages

Answer

To manage day-to-day operational decisions

Question 2

Which of the following best describes 'moral relativism' in business ethics?

Accepted Answer

The view that ethical judgments are not absolute but depend on cultural or individual context

Answer

The belief that ethical standards are universal and apply equally across all cultures

Answer

The principle that profit-making is the highest moral good in business

Answer

A legal doctrine that holds companies liable for their managers' unethical actions

Question 3

The principal-agent problem in corporate governance arises when:

Accepted Answer

Managers (agents) pursue their own interests at the expense of shareholders (principals)

Answer

Two companies compete for the same customers

Answer

A company expands into a new market without sufficient capital

Answer

Board members disagree over strategic direction

Question 4

According to the Foreign Corrupt Practices Act (FCPA), U.S. companies are prohibited from:

Accepted Answer

Bribing foreign government officials to obtain or retain business

Answer

Competing in foreign markets without local partnerships

Answer

Hiring foreign nationals as senior executives

Answer

Importing goods manufactured with lower environmental standards

Question 5

Which ethical concept refers to a company's obligation to treat all employees, customers, and stakeholders without discrimination?

Accepted Answer

Organizational fairness

Answer

Corporate accountability

Answer

Transparency

Answer

Fiduciary duty

Question 6

A 'hostile takeover' in corporate governance typically involves:

Accepted Answer

An acquirer bypassing the target company's board to appeal directly to shareholders

Answer

A company filing for bankruptcy protection to avoid debt obligations

Answer

Two companies merging with full cooperation of both boards

Answer

A government nationalizing a private corporation

Question 7

Which of the following governance mechanisms is designed to align the interests of executives with those of shareholders?

Accepted Answer

Performance-based compensation including stock options

Answer

Fixed base salaries tied to seniority

Answer

Strict expense reimbursement policies

Answer

Mandatory retirement age policies for executives