CBS CBS Corporate Governance & Ethics 1 — Questions and Answers
Question 1: Which governance model separates the roles of CEO and Board Chair to reduce conflicts of interest?
- Unitary board model
- Dual leadership structure (Correct answer)
- Stewardship model
- Agency theory model
Correct answer: Dual leadership structure
A dual leadership structure separates the CEO and Board Chair roles to provide independent oversight and reduce conflicts of interest.
Question 2: A company's code of ethics primarily serves to:
- Maximize short-term shareholder profits
- Establish legal immunity for executives
- Guide employee behavior and decision-making aligned with organizational values (Correct answer)
- Replace government regulations
Correct answer: Guide employee behavior and decision-making aligned with organizational values
A code of ethics provides a framework that guides employee behavior and ensures decisions align with the organization's core values.
Question 3: Which U.S. legislation significantly strengthened corporate governance requirements for publicly traded companies after major accounting scandals?
- Sherman Antitrust Act
- Sarbanes-Oxley Act (Correct answer)
- Dodd-Frank Act
- Securities Exchange Act of 1934
Correct answer: Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 was enacted in response to Enron and WorldCom scandals, mandating stricter financial disclosure and internal controls.
Question 4: In agency theory, who is the 'principal' in the relationship between shareholders and management?
- The CEO
- The Board of Directors
- The shareholders (Correct answer)
- The CFO
Correct answer: The shareholders
In agency theory, shareholders are the principals who delegate authority to agents (managers) to act on their behalf.
Question 5: A whistleblower policy in corporate governance is designed to:
- Penalize employees who report misconduct
- Encourage reporting of unethical conduct without fear of retaliation (Correct answer)
- Monitor competitor activities
- Control marketing communications
Correct answer: Encourage reporting of unethical conduct without fear of retaliation
Whistleblower policies protect and encourage employees to report unethical or illegal conduct without facing retaliation.
Question 6: Which concept refers to a company's obligation to consider the interests of all stakeholders, not just shareholders?
- Shareholder primacy
- Corporate Social Responsibility (CSR) (Correct answer)
- Fiduciary duty
- Profit maximization
Correct answer: Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR) reflects a company's commitment to balancing the needs of all stakeholders including employees, communities, and the environment.
CBS CBS Corporate Governance & Ethics 1
Which governance model separates the roles of CEO and Board Chair to reduce conflicts of interest?