CFO CFO Corporate Governance & Compliance 2 — Questions and Answers
Question 1: What is the Foreign Corrupt Practices Act (FCPA) primarily concerned with?
- Tariffs on imported goods
- Prohibiting bribery of foreign government officials by U.S. companies (Correct answer)
- Currency exchange manipulation
- International transfer pricing rules
Correct answer: Prohibiting bribery of foreign government officials by U.S. companies
The FCPA prohibits U.S. companies and individuals from bribing foreign government officials to obtain or retain business.
Question 2: What is the purpose of a whistleblower policy in a publicly traded company?
- To monitor competitor pricing
- To provide a confidential channel for employees to report suspected fraud or violations without retaliation (Correct answer)
- To track executive travel expenses
- To disclose insider trading to regulators
Correct answer: To provide a confidential channel for employees to report suspected fraud or violations without retaliation
Whistleblower policies protect employees who report financial fraud, SOX violations, or other misconduct, and are required by SOX for listed companies.
Question 3: Which type of corporate governance document outlines the rights, responsibilities, and rules for conducting board meetings?
- Proxy statement
- Corporate bylaws (Correct answer)
- 10-K filing
- Management discussion and analysis
Correct answer: Corporate bylaws
Corporate bylaws govern the internal management of the company, including the conduct of board meetings, officer roles, and shareholder rights.
Question 4: What is 'Regulation FD' (Fair Disclosure) and how does it affect CFOs?
- A rule requiring equal pay disclosures
- An SEC rule prohibiting selective disclosure of material nonpublic information to certain investors (Correct answer)
- A mandate for quarterly earnings calls
- A requirement to file insider trading reports
Correct answer: An SEC rule prohibiting selective disclosure of material nonpublic information to certain investors
Regulation FD requires that when a company discloses material nonpublic information to certain market participants, it must simultaneously or promptly disclose it to the public.
Question 5: What is the primary purpose of a proxy statement (Form DEF 14A) filed by a public company?
- To disclose quarterly revenue
- To provide shareholders with information needed to vote at the annual meeting, including executive compensation (Correct answer)
- To report major asset acquisitions
- To update earnings guidance
Correct answer: To provide shareholders with information needed to vote at the annual meeting, including executive compensation
A proxy statement gives shareholders information about agenda items at the annual meeting, including director elections, executive pay, and auditor ratification.
Question 6: Under the Dodd-Frank Act, which type of executive pay vote must most public companies hold at least every three years?
- Say-on-golden-parachutes vote
- Say-on-pay vote (Correct answer)
- Clawback approval vote
- Director compensation referendum
Correct answer: Say-on-pay vote
Dodd-Frank requires public companies to hold non-binding 'say-on-pay' votes allowing shareholders to approve or reject executive compensation packages.
CFO CFO Corporate Governance & Compliance 2
What is the Foreign Corrupt Practices Act (FCPA) primarily concerned with?