CSM Professional Ethics & Governance 3 — Questions and Answers
Question 1: A board of directors is evaluating a major acquisition that benefits the CEO personally. Which governance safeguard is most appropriate?
- Expedite approval to capture market opportunity
- Require the CEO to recuse from the vote and form an independent committee (Correct answer)
- Allow the CEO to lead the evaluation for efficiency
- Table the discussion indefinitely
Correct answer: Require the CEO to recuse from the vote and form an independent committee
When a conflict of interest exists, the conflicted party should recuse themselves, and an independent committee should evaluate the transaction to protect shareholders.
Question 2: The 'triple bottom line' framework in strategic governance measures organizational performance across:
- Revenue, profit, and market share
- People, planet, and profit (Correct answer)
- Strategy, execution, and results
- Governance, risk, and compliance
Correct answer: People, planet, and profit
The triple bottom line framework evaluates organizational success across social (people), environmental (planet), and financial (profit) dimensions simultaneously.
Question 3: Which type of audit specifically evaluates whether an organization is following its own stated ethical policies and codes of conduct?
- Financial audit
- Operational audit
- Ethics and compliance audit (Correct answer)
- Tax audit
Correct answer: Ethics and compliance audit
An ethics and compliance audit systematically examines whether the organization's practices align with its stated ethical policies, codes of conduct, and regulatory requirements.
Question 4: Stakeholder theory in strategic management argues that managers should primarily:
- Maximize returns for shareholders above all others
- Balance the interests of all parties affected by the organization's actions (Correct answer)
- Focus exclusively on customer satisfaction metrics
- Prioritize employee welfare over financial performance
Correct answer: Balance the interests of all parties affected by the organization's actions
Stakeholder theory holds that organizations have ethical obligations to all parties impacted by their decisions, not just shareholders, requiring managers to balance competing interests.
Question 5: Which governance principle requires that decision-makers be answerable for their actions and the outcomes of those actions?
- Transparency
- Accountability (Correct answer)
- Integrity
- Sustainability
Correct answer: Accountability
Accountability is the governance principle that holds individuals responsible for their decisions and requires them to answer to stakeholders for the consequences of those decisions.
Question 6: A strategic manager faces pressure to cut corners on environmental compliance to meet quarterly targets. This scenario represents a conflict between:
- Short-term financial goals and long-term ethical obligations (Correct answer)
- Board directives and management discretion
- Customer needs and regulatory requirements
- Strategy formulation and implementation
Correct answer: Short-term financial goals and long-term ethical obligations
This scenario illustrates the classic tension between short-term financial performance pressure and the organization's long-term ethical, legal, and sustainability obligations.
Question 7: In corporate governance, an 'independent director' is best defined as a board member who:
- Has the highest level of industry expertise
- Has no material relationship with the company that could compromise objectivity (Correct answer)
- Represents the interests of minority shareholders only
- Was appointed by the founding family of the organization
Correct answer: Has no material relationship with the company that could compromise objectivity
An independent director has no material financial, personal, or professional ties to the company or its management that could impair their ability to exercise objective judgment.
CSM Professional Ethics & Governance 3
A board of directors is evaluating a major acquisition that benefits the CEO personally.
Which governance safeguard is most appropriate?