CCM Corporate Governance and Ethical Standards 3 — Questions and Answers
Question 1: Which of the following BEST describes a 'tone at the top' in compliance governance?
- The volume of compliance training provided to front-line staff
- Senior leadership's demonstrated commitment to ethical conduct and compliance (Correct answer)
- The strictness of disciplinary policies for violations
- The number of compliance policies documented
Correct answer: Senior leadership's demonstrated commitment to ethical conduct and compliance
Tone at the top refers to senior leadership visibly modeling and reinforcing ethical behavior and compliance culture.
Question 2: Under the Business Judgment Rule, courts generally will NOT second-guess board decisions if directors acted with:
- Majority shareholder approval, good faith, and informed basis
- Good faith, informed basis, and honest belief the action was in the company's best interest (Correct answer)
- Regulatory approval, due diligence, and documented minutes
- Independent counsel review, informed basis, and unanimous vote
Correct answer: Good faith, informed basis, and honest belief the action was in the company's best interest
The Business Judgment Rule protects directors who acted in good faith, on an informed basis, and with an honest belief in the company's best interest.
Question 3: What is the primary purpose of a Board Skills Matrix?
- To document director compensation
- To assign committee chairmanships
- To identify gaps in collective board competencies (Correct answer)
- To evaluate individual director performance
Correct answer: To identify gaps in collective board competencies
A skills matrix maps existing board competencies against needed expertise to identify gaps for recruitment purposes.
Question 4: Which ethical theory holds that the morality of an action is determined solely by its consequences?
- Deontology
- Virtue ethics
- Consequentialism (Correct answer)
- Social contract theory
Correct answer: Consequentialism
Consequentialism (including utilitarianism) judges actions as right or wrong based on their outcomes.
Question 5: A whistleblower policy MUST include which of the following to be effective?
- Public disclosure of all reported violations
- Mandatory reporting to law enforcement
- Non-retaliation protections for good-faith reporters (Correct answer)
- Requirement for reporters to provide their full name
Correct answer: Non-retaliation protections for good-faith reporters
Effective whistleblower policies must protect reporters from retaliation to encourage good-faith reporting.
Question 6: The concept of 'say on pay' allows shareholders to:
- Directly set executive salary levels
- Vote on executive compensation packages, typically in an advisory capacity (Correct answer)
- Veto individual compensation agreements
- Require board members to disclose personal income
Correct answer: Vote on executive compensation packages, typically in an advisory capacity
Say on pay is typically an advisory shareholder vote on executive compensation disclosures, required by Dodd-Frank for public companies.
Question 7: Which governance document typically defines the purpose, authority, and responsibilities of a board committee?
- Corporate bylaws
- Board resolution
- Committee charter (Correct answer)
- Proxy statement
Correct answer: Committee charter
A committee charter formally defines the committee's mandate, composition requirements, meeting frequency, and key responsibilities.
CCM Corporate Governance and Ethical Standards 3
Which of the following BEST describes a 'tone at the top' in compliance governance?