Corporate Governance and Ethical Standards Flashcards

Which board committee is primarily responsible for overseeing financial reporting integrity and external auditor relationships?

Answer: Audit Committee

The Audit Committee oversees financial reporting, internal controls, and the relationship with external auditors.

Under the Sarbanes-Oxley Act, what is the maximum prison term for securities fraud?

Answer: 20 years

SOX Section 1348 establishes a maximum 20-year prison sentence for securities fraud.

What governance principle requires that board members act in the best interests of shareholders rather than personal gain?

Answer: Duty of Loyalty

The Duty of Loyalty requires directors to prioritize shareholder interests over personal interests and avoid conflicts.

A company's code of conduct should be reviewed and updated at minimum how often according to best practices?

Answer: Annually

Best practice is annual review of the code of conduct to ensure alignment with current laws, regulations, and business practices.

Which governance structure separates the roles of CEO and Board Chair to reduce concentration of power?

Answer: Non-executive chair model

A non-executive (independent) chair model separates leadership of the board from management, reducing power concentration.

What term describes the process by which shareholders elect directors and vote on major corporate decisions?

Answer: Shareholder franchise

The shareholder franchise refers to shareholders' right to vote on corporate matters, including director elections.

An employee discovers the CFO is manipulating earnings reports. The MOST appropriate first action under an ethical framework is to:

Answer: Report through the internal escalation or hotline process

Internal escalation channels, such as ethics hotlines or audit committees, should typically be used first before external reporting.