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Corporate Governance and Ethical Standards Flashcards

7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Corporate Governance and Ethical Standards flashcards as text

  1. Which Sarbanes-Oxley section requires CEOs and CFOs to personally certify the accuracy of financial reports?

    Answer: Section 302

    SOX Section 302 requires principal executive and financial officers to certify the accuracy and completeness of periodic financial reports.

  2. A director who owns 2% of company stock and regularly consults for a major vendor would MOST likely fail which independence test?

    Answer: Material relationship test

    The material relationship test disqualifies directors who have business, financial, or other relationships that could compromise independent judgment.

  3. In ethical decision-making, what does the 'newspaper front page test' help evaluate?

    Answer: Whether an action would withstand public scrutiny if reported in the media

    The newspaper test asks whether an action would be reported as improper if publicized, serving as a gut-check for ethical soundness.

  4. Which governance mechanism is designed to align long-term executive incentives with shareholder value creation?

    Answer: Performance-based equity awards with multi-year vesting

    Performance-based equity with multi-year vesting ties executive rewards to sustained long-term shareholder value rather than short-term results.

  5. What is the primary difference between corporate governance and compliance?

    Answer: Governance is the system of rules and processes directing a company; compliance ensures adherence to laws and internal rules

    Governance is the overarching framework of authority, accountability, and decision-making; compliance is the function ensuring rules within that framework are followed.

  6. Which of the following BEST describes a 'related-party transaction' requiring disclosure?

    Answer: A business deal between the company and a director's immediate family member

    Related-party transactions involve company dealings with directors, executives, major shareholders, or their close family members, creating potential conflicts of interest.

  7. An effective corporate ethics program under the US Federal Sentencing Guidelines requires which of the following elements?

    Answer: Established standards, oversight, training, monitoring, and enforcement with incentives for compliance

    The Federal Sentencing Guidelines Chapter 8 specifies seven elements of an effective compliance and ethics program, including standards, oversight, training, monitoring, and enforcement.