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
Which board committee is primarily responsible for overseeing a company's ESG risks and sustainability strategy?
Answer: Sustainability or ESG Committee
A dedicated Sustainability or ESG Committee holds primary board-level responsibility for overseeing ESG risks and strategy.
What governance principle requires that the individuals who authorize transactions are different from those who record or reconcile them?
Answer: Segregation of duties
Segregation of duties is an internal control principle that separates authorization, recording, and custody functions to reduce fraud risk.
In ESG governance, what does 'tone at the top' primarily refer to?
Answer: Senior leadership's commitment and behavior toward ethical standards
'Tone at the top' refers to the ethical climate established by senior leadership through their attitudes, behaviors, and communications.
Which UN framework specifically guides multinational enterprises on human rights due diligence in their governance practices?
Answer: UN Guiding Principles on Business and Human Rights (UNGPs)
The UN Guiding Principles on Business and Human Rights (UNGPs), known as the Ruggie Framework, establish the corporate responsibility to respect human rights.
A company's board has a majority of directors who previously worked at the company's main audit firm. Which governance concern does this raise?
Answer: Board independence
Board independence is compromised when directors have prior relationships with the company or its service providers, reducing objective oversight.
What is the primary purpose of a whistleblower protection policy in corporate governance?
Answer: To encourage reporting of misconduct without fear of retaliation
Whistleblower protection policies create safe channels for employees to report misconduct without fear of retaliation, improving internal accountability.
Which governance mechanism is most effective at aligning executive pay with long-term ESG performance?
Answer: Long-term incentive plans tied to ESG metrics
Long-term incentive plans (LTIPs) tied to ESG metrics align executive compensation with sustained sustainability outcomes rather than short-term financial results.