Professional Ethics & Governance Flashcards

In strategic governance, 'say on pay' policies give shareholders the right to:

Answer: Vote on executive compensation packages, typically in an advisory capacity

Say on pay gives shareholders an advisory vote on executive compensation packages, increasing transparency and accountability in how leaders are rewarded.

An organization's ethics hotline receives a report alleging financial misconduct by the CFO. The board's audit committee should:

Answer: Commission an independent investigation led by external counsel

When senior leadership is implicated, the audit committee must commission an independent investigation using external counsel to ensure objectivity and protect the organization's legal interests.

The 'business judgment rule' in corporate governance protects directors from liability when they:

Answer: Act in good faith, with due care, and in the honest belief they are acting in the company's best interest

The business judgment rule protects directors who act in good faith, make informed decisions, and genuinely believe they are acting in the company's best interest, even if those decisions later prove wrong.

Which ethical framework holds that certain actions are inherently right or wrong regardless of their consequences?

Answer: Deontological ethics

Deontological ethics, associated with Kant, judges actions based on adherence to rules and duties rather than outcomes, holding that some acts are intrinsically right or wrong.

A company's code of ethics should be reviewed and updated:

Answer: Periodically and when significant regulatory, business, or societal changes occur

Codes of ethics should be reviewed regularly and updated when significant regulatory changes, new business activities, or evolving societal expectations make existing provisions insufficient.

Environmental, Social, and Governance (ESG) reporting primarily serves to:

Answer: Provide stakeholders with information on non-financial risks and organizational responsibility

ESG reporting discloses an organization's performance on environmental stewardship, social responsibility, and governance practices, enabling stakeholders to assess non-financial risks and long-term sustainability.

Which of the following represents a failure of the 'duty of loyalty' for a board member?

Answer: Approving a contract with a vendor in which the director holds a personal financial interest without disclosure

Duty of loyalty requires directors to put the company's interests ahead of their own; approving a self-interested contract without disclosure violates this duty by placing personal gain above the organization's welfare.