CCT Ethics & Corporate Governance 3 — Questions and Answers
Question 1: A company voluntarily discloses a potential FCPA violation to the DOJ before an investigation begins. What is the primary benefit of voluntary self-disclosure?
- Eligibility for reduced penalties and cooperation credit (Correct answer)
- Complete immunity from prosecution
- Automatic deferred prosecution agreement
- Suspension of all fines
Correct answer: Eligibility for reduced penalties and cooperation credit
The DOJ's FCPA Corporate Enforcement Policy rewards voluntary self-disclosure with the possibility of a declination or significantly reduced penalties when combined with full cooperation.
Question 2: Which ethical theory holds that the morality of an action is determined solely by its consequences and outcomes?
- Consequentialism (Correct answer)
- Deontology
- Virtue ethics
- Social contract theory
Correct answer: Consequentialism
Consequentialism (including utilitarianism) judges actions as right or wrong based solely on the outcomes they produce.
Question 3: Under Sarbanes-Oxley Section 302, who must certify the accuracy of quarterly and annual financial reports?
- CEO and CFO (Correct answer)
- External auditor and audit committee chair
- General counsel and CFO
- Board chairman and CEO
Correct answer: CEO and CFO
SOX Section 302 requires the CEO and CFO to personally certify the accuracy of periodic financial reports filed with the SEC.
Question 4: A compliance officer learns an employee accessed a competitor's confidential files obtained through hacking. This situation most directly involves which ethical concept?
- Misappropriation of confidential information (Correct answer)
- Insider trading
- Bribery of a public official
- Antitrust price fixing
Correct answer: Misappropriation of confidential information
Accessing confidential files obtained through unauthorized means constitutes misappropriation of confidential information and potentially violates the Computer Fraud and Abuse Act.
Question 5: Which governance mechanism allows shareholders to remove underperforming directors without a contested election by majority vote?
- Majority voting standard (Correct answer)
- Plurality voting standard
- Cumulative voting
- Proxy access rule
Correct answer: Majority voting standard
Under a majority voting standard, directors who receive more 'withheld' votes than 'for' votes must tender their resignation for board consideration.
Question 6: An anti-money laundering (AML) compliance program must include all of the following EXCEPT:
- Annual criminal background checks on all customers (Correct answer)
- Internal controls and policies
- Designation of a compliance officer
- Ongoing employee training
Correct answer: Annual criminal background checks on all customers
The Bank Secrecy Act's four pillars of AML compliance are internal controls, a designated compliance officer, employee training, and independent testing — annual criminal background checks on all customers are not required.
Question 7: When a company adopts a clawback policy under SEC Rule 10D-1, it must recoup incentive compensation erroneously awarded in connection with:
- An accounting restatement due to material noncompliance (Correct answer)
- Any voluntary earnings revision
- A change in CEO leadership
- A stock price decline of 20% or more
Correct answer: An accounting restatement due to material noncompliance
SEC Rule 10D-1 (implementing Dodd-Frank) requires clawback of incentive-based compensation paid in the three fiscal years before an accounting restatement triggered by material noncompliance.
CCT Ethics & Corporate Governance 3
A company voluntarily discloses a potential FCPA violation to the DOJ before an investigation begins.
What is the primary benefit of voluntary self-disclosure?