CEP Governance Structures & Ethical Practices 4

Question 1

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

Accepted Answer

CEO and CFO personal certification of financial report accuracy

Answer

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

Question 2

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

Accepted Answer

Short-termism

Answer

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

Question 3

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

Accepted Answer

To provide independent assessments of companies' ESG performance for investors

Answer

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

Question 4

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

Accepted Answer

Competency misalignment or skills gap

Answer

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.

Question 5

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

Accepted Answer

Maximizing long-term shareholder value above all other considerations

Answer

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

(CEP) Certified Environmental, Social, and Governance (ESG) Planner Practice Test

(CEP) Certified Environmental, Social, and Governance (ESG) Planner Practice Test

CEP Governance Structures & Ethical Practices 4