Business Ethics & Corporate Governance Flashcards

A vendor offers a compliance manager an all-expenses-paid trip to a resort in exchange for recommending their software to the procurement committee. This is best described as:

Answer: A quid pro quo bribe that violates ethical and likely legal standards

Accepting valuable benefits in exchange for business recommendations constitutes a bribe and violates ethical standards regardless of whether the recommendation is made.

Which of the following scenarios represents a 'related-party transaction' that requires board scrutiny?

Answer: The CEO's spouse's firm is awarded a major consulting contract

Related-party transactions involve dealings between the company and insiders or their associates, creating conflicts of interest that demand independent board review.

The Sarbanes-Oxley Act Section 302 requires that:

Answer: CEOs and CFOs personally certify the accuracy of financial reports and the effectiveness of internal controls

SOX Section 302 mandates that the principal executive and financial officers personally certify the accuracy of periodic financial reports and internal control disclosures.

A company discovers its third-party supplier uses child labor, which is legal in the supplier's country but violates the company's supplier code of conduct. The ethical response is to:

Answer: Engage the supplier with a remediation plan and defined timeline, with termination if compliance fails

Ethical supply chain management requires companies to enforce their standards through structured remediation while holding suppliers accountable, balancing impact on workers with upholding principles.

Which of the following best defines 'fiduciary duty' as it applies to corporate directors?

Answer: A duty of care and loyalty requiring directors to act in the best interests of the corporation and its shareholders

Fiduciary duty encompasses the duty of care (act with informed diligence) and duty of loyalty (prioritize the corporation's interests over personal interests).

A company's general counsel learns of potential securities fraud by the CFO. After raising the issue internally without result, under SEC rules the attorney must:

Answer: Continue raising the issue internally, including to the audit committee or full board

SEC Rule 205 requires attorneys who discover material securities violations to report up the corporate ladder, including to the audit committee or board if management fails to act.

The concept of 'greenwashing' in the context of business ethics refers to:

Answer: Making misleading claims about the environmental benefits of products or practices to appear more sustainable

Greenwashing involves companies overstating or fabricating environmental credentials to exploit consumer and investor interest in sustainability without genuine action.