Corporate Governance and Ethical Standards Flashcards

What is the main goal of corporate governance?

Answer: Enhance shareholder and stakeholder trust

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. Its main goal is to ensure accountability, transparency, and fairness in a company's relationship with all its stakeholders. This ultimately builds and maintains trust, contributing to the company's long-term value and reputation.

Which document outlines a company’s commitment to ethical practices?

Answer: Code of conduct

A code of conduct is a formal document that outlines an organization's ethical principles, values, and expected standards of behavior for its employees, board members, and sometimes suppliers. It serves as a guide for decision-making and helps foster a culture of integrity and compliance within the company, demonstrating its commitment to ethical practices.

What is the board of directors primarily responsible for?

Answer: Providing oversight and governance

The board of directors is primarily responsible for providing oversight and governance to the company. They oversee management, set strategic direction, approve major decisions, and monitor performance to ensure the company operates in the best interests of its shareholders and other stakeholders. They do not manage daily operations.

Which of the following is considered a breach of ethical standards in a corporate setting?

Answer: Using insider information for personal gain

Using insider information for personal gain, also known as insider trading, is a severe breach of ethical standards and often illegal. It involves leveraging non-public information obtained through one's position to make financial decisions. This practice is unfair to other market participants and undermines the integrity of financial markets.

Why are whistleblower protections important?

Answer: They protect reporting individuals from retaliation

Whistleblower protections are crucial because they encourage individuals to report illegal, unethical, or harmful activities within an organization without fear of negative repercussions. By safeguarding whistleblowers from retaliation, these protections help uncover misconduct, promote transparency, and uphold corporate accountability, benefiting both the organization and the public.

Which ethical principle promotes fairness in decision-making?

Answer: Justice

The ethical principle of justice promotes fairness, impartiality, and equitable treatment in decision-making and resource allocation. It ensures that individuals are treated fairly, that rules are applied consistently, and that decisions are made without bias. This principle considers the rights and needs of all affected parties.