CBS CBS Corporate Governance & Ethics 2 — Questions and Answers
Question 1: A board audit committee is primarily responsible for:
- Setting executive compensation
- Overseeing financial reporting and external auditors (Correct answer)
- Approving marketing strategies
- Managing day-to-day operations
Correct answer: Overseeing financial reporting and external auditors
The audit committee oversees financial reporting integrity, internal controls, and the relationship with external auditors.
Question 2: The term 'fiduciary duty' in corporate governance means board members must:
- Maximize their personal compensation
- Act in the best interests of the corporation and its shareholders (Correct answer)
- Follow all management directives without question
- Report only to the CEO
Correct answer: Act in the best interests of the corporation and its shareholders
Fiduciary duty requires board members to act loyally and in good faith in the best interests of the corporation and its shareholders.
Question 3: Which governance principle holds that board members should have access to accurate and timely company information?
- Accountability
- Transparency (Correct answer)
- Responsibility
- Fairness
Correct answer: Transparency
Transparency as a governance principle ensures board members and stakeholders receive accurate, timely, and complete information to make informed decisions.
Question 4: ESG investing integrates which three factors into investment decisions?
- Earnings, Sales, Growth
- Environmental, Social, Governance (Correct answer)
- Equity, Strategy, Goals
- Efficiency, Sustainability, Governance
Correct answer: Environmental, Social, Governance
ESG stands for Environmental, Social, and Governance — three criteria used to evaluate a company's ethical impact and sustainability alongside financial performance.
Question 5: An independent board director is best described as someone who:
- Is employed full-time by the company
- Has no material relationship with the company that could impair objectivity (Correct answer)
- Was appointed by the CEO
- Holds the largest share of stock
Correct answer: Has no material relationship with the company that could impair objectivity
An independent director has no material financial or personal ties to the company, enabling impartial oversight of management.
Question 6: Which ethical framework evaluates business decisions based on outcomes and the greatest good for the greatest number?
- Deontological ethics
- Virtue ethics
- Utilitarianism (Correct answer)
- Social contract theory
Correct answer: Utilitarianism
Utilitarianism judges decisions based on their outcomes, favoring actions that produce the greatest overall benefit for the most people.
CBS CBS Corporate Governance & Ethics 2
A board audit committee is primarily responsible for: