Ethics & Corporate Governance Flashcards

A board's nominating committee fails to assess diversity when recruiting new directors. Which governance best practice is being neglected?

Answer: Board composition and diversity oversight

Nominating committees are expected under corporate governance best practices and SEC disclosure rules to consider diversity of skills, backgrounds, and perspectives when evaluating director candidates.

Which scenario best illustrates a 'tone at the top' failure in corporate governance?

Answer: Senior executives routinely override expense approval controls

Tone at the top refers to leadership's demonstrated commitment to ethical conduct; executives who override controls signal that rules do not apply to them, undermining the entire compliance culture.

Under the Telephone Consumer Protection Act (TCPA), which practice requires prior express written consent?

Answer: Sending marketing text messages using an autodialer

The TCPA requires prior express written consent before sending marketing texts or calls using an automatic telephone dialing system to cell phones.

An ethics hotline report alleges that a compliance manager is retaliating against a whistleblower. Who should ideally investigate this complaint?

Answer: An independent third party or internal audit reporting to the audit committee

When the accused is within the compliance function, the investigation must bypass that function and be conducted by an independent party reporting to the audit committee to preserve objectivity.

Which of the following is an example of insider trading based on the 'misappropriation theory'?

Answer: A financial journalist trades on material nonpublic information learned during news gathering

The misappropriation theory extends insider trading liability to outsiders who trade on material nonpublic information in breach of a duty owed to the information source, such as an employer.

A compliance officer is pressured by the CFO to ignore a red flag in the company's expense reporting. Applying the 'reasonable person' standard, the compliance officer should:

Answer: Escalate the concern through appropriate channels despite the pressure

A reasonable compliance officer would escalate the concern to the audit committee or board, not yield to inappropriate pressure from management.

Which international standard provides a framework for anti-bribery management systems that organizations can certify against?

Answer: ISO 37001

ISO 37001 is the international standard specifically designed to help organizations establish, implement, and certify an anti-bribery management system.