Corporate Governance & Ethical Practices Flashcards

Which of the following scenarios MOST likely constitutes a breach of the duty of loyalty?

Answer: A director votes to approve a corporate opportunity that the director secretly intends to pursue personally

Usurping a corporate opportunity for personal gain without disclosure is a classic breach of the duty of loyalty.

Under the FCPA, which of the following payments to a foreign government official would MOST likely be permissible?

Answer: A small facilitating payment to expedite a routine customs clearance in a country that allows it

The FCPA's facilitating payments exception applies to routine, non-discretionary government actions such as processing permits or customs clearances.

A board's nominating and governance committee is PRIMARILY responsible for:

Answer: Identifying and recommending qualified board candidates and overseeing governance policies

The nominating and governance committee oversees board composition, director qualifications, and the company's corporate governance framework.

A company that learns its supplier uses forced labor in its supply chain should PRIMARILY:

Answer: Assess the risk, engage the supplier for remediation, and escalate or exit if unresolved

Best practice under supply chain due diligence frameworks requires risk assessment, supplier engagement for remediation, and escalation or exit if remediation fails.

Which governance structure BEST protects minority shareholders in a company with a controlling shareholder?

Answer: Independent directors with authority to review and approve related-party transactions

Independent director oversight of related-party transactions is the primary mechanism to protect minority shareholders from self-dealing by a controlling shareholder.

An effective corporate compliance program, as defined by the DOJ's evaluation criteria, must include which element?

Answer: Risk assessment processes that periodically evaluate where the program needs to be updated

The DOJ evaluates whether a compliance program is dynamic, including whether companies conduct risk assessments to identify gaps and update their programs accordingly.

A director who learns of material non-public information about a competitor during a board meeting should:

Answer: Refrain from trading in any security affected by the information and maintain confidentiality

Directors who possess material non-public information are prohibited from trading on it or tipping others under SEC insider trading rules.