Practice Test Geeks(CEP) Certified Environmental, Social, and Governance (ESG) Planner Practice Test
← All CEP Flashcard Decks

Governance Structures & Ethical Practices Flashcards

7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Governance Structures & Ethical Practices flashcards as text

  1. The Sarbanes-Oxley Act (SOX) Section 302 requires which of the following in US public companies?

    Answer: CEO and CFO personal certification of financial report accuracy

    SOX Section 302 requires CEOs and CFOs to personally certify the accuracy and completeness of financial reports filed with the SEC.

  2. Which concept describes the risk that a company's governance decisions may create short-term profits but long-term ESG liabilities?

    Answer: Short-termism

    Short-termism occurs when governance incentives prioritize immediate financial gains over sustainable long-term value creation, often at the expense of ESG performance.

  3. What is the role of an ESG ratings agency in corporate governance?

    Answer: To provide independent assessments of companies' ESG performance for investors

    ESG ratings agencies like MSCI and Sustainalytics provide independent assessments of corporate ESG performance to help investors make informed decisions.

  4. A board lacks members with climate science or environmental expertise when overseeing a carbon-intensive company. This represents what governance gap?

    Answer: Competency misalignment or skills gap

    A competency or skills gap occurs when the board lacks expertise relevant to the material risks the company faces, such as climate risk for energy companies.

  5. What does 'shareholder primacy' theory hold as the primary duty of corporate governance?

    Answer: Maximizing long-term shareholder value above all other considerations

    Shareholder primacy theory, associated with Milton Friedman, holds that management's primary duty is to maximize returns for shareholders.

  6. Under the UK Corporate Governance Code, what is the recommended minimum proportion of independent non-executive directors on the board of a FTSE 350 company?

    Answer: Half

    The UK Corporate Governance Code recommends that at least half of the board (excluding the chair) should comprise independent non-executive directors for FTSE 350 companies.

  7. Which best describes 'stewardship' in the context of institutional investor governance?

    Answer: Active engagement by investors to influence corporate behavior on ESG issues

    Stewardship refers to institutional investors actively engaging with companies through voting, dialogue, and escalation to promote better long-term governance and ESG practices.