CEA Ethical Leadership Development 4 — Questions and Answers
Question 1: A leader discovers a colleague is engaged in insider trading. The most appropriate ethical action is to:
- Warn the colleague privately and allow them to self-report
- Report the activity through the organization's compliance or legal channel (Correct answer)
- Ignore it since it does not directly affect the leader's work
- Gather more evidence over several months before acting
Correct answer: Report the activity through the organization's compliance or legal channel
Insider trading is illegal and the ethical duty requires prompt reporting through appropriate compliance channels, not self-resolution.
Question 2: Which of the following is an example of 'ethical fading' in leadership?
- Deliberately choosing an unethical option for personal gain
- Gradual desensitization to ethical concerns through small incremental compromises (Correct answer)
- Openly debating the ethics of a decision with stakeholders
- Refusing to escalate an ethical concern to avoid career risk
Correct answer: Gradual desensitization to ethical concerns through small incremental compromises
Ethical fading occurs when the moral dimension of decisions gradually disappears from awareness due to repeated small compromises.
Question 3: Which of the following best describes the 'newspaper front-page test' as an ethical decision-making tool?
- Checking whether a decision complies with securities disclosure rules
- Asking whether you would be comfortable if the decision were reported publicly (Correct answer)
- Surveying employees on whether a decision should be publicized
- Reviewing whether competitors have made similar decisions publicly
Correct answer: Asking whether you would be comfortable if the decision were reported publicly
The newspaper front-page test prompts decision-makers to consider whether a decision would withstand public scrutiny and media coverage.
Question 4: Ethical leaders foster psychological safety primarily to:
- Protect the organization from legal liability
- Enable employees to raise concerns without fear of retaliation (Correct answer)
- Reduce the number of formal grievances filed
- Encourage employees to bypass formal reporting channels
Correct answer: Enable employees to raise concerns without fear of retaliation
Psychological safety allows employees to speak up about ethical concerns, mistakes, or misconduct without fear of negative consequences.
Question 5: A leader who consistently acts in accordance with their stated values is best described as demonstrating:
- Charismatic authority
- Integrity (Correct answer)
- Compliance
- Pragmatism
Correct answer: Integrity
Integrity is the alignment between a leader's stated values and their actual behavior — walking the talk consistently.
Question 6: In stakeholder ethics, a leader balancing employee welfare, customer safety, community impact, and shareholder returns is applying which approach?
- Shareholder primacy theory
- Stakeholder theory (Correct answer)
- Social contract theory
- Agency theory
Correct answer: Stakeholder theory
Stakeholder theory holds that leaders have ethical obligations to all groups affected by their decisions, not only shareholders.
Question 7: What is the primary purpose of an ethics hotline in an organization?
- To monitor employee communications for compliance violations
- To provide a confidential channel for reporting suspected misconduct (Correct answer)
- To replace a formal code of ethics
- To log ethics training completions
Correct answer: To provide a confidential channel for reporting suspected misconduct
An ethics hotline provides employees a confidential — often anonymous — mechanism to report potential misconduct without direct managerial contact.
CEA Ethical Leadership Development 4
A leader discovers a colleague is engaged in insider trading.
The most appropriate ethical action is to: