Governance Structures & Ethical Practices Flashcards

Under the OECD Principles of Corporate Governance, which stakeholder group's interests must be recognized to enable wealth creation and sustainability?

Answer: A broad range of stakeholders including employees, suppliers, and communities

The OECD Principles explicitly recognize that corporate governance frameworks should acknowledge the interests of stakeholders and their role in long-term corporate performance.

What is the primary role of an Audit Committee in ESG governance?

Answer: Overseeing the integrity of financial and increasingly non-financial ESG disclosures

The Audit Committee ensures the accuracy and reliability of both financial statements and ESG disclosures, particularly as assurance requirements grow.

A multinational company operates in a country where bribery of government officials is common practice. According to the FCPA, the company:

Answer: Is prohibited from bribing foreign officials regardless of local norms

The Foreign Corrupt Practices Act prohibits US companies and their agents from bribing foreign government officials regardless of local customs or competitive pressure.

Which of the following BEST describes 'overboarding' in corporate governance?

Answer: When a director serves on too many boards simultaneously, potentially compromising their effectiveness

Overboarding occurs when a director holds so many board seats that they cannot adequately prepare for or attend meetings, diluting their oversight quality.

In ESG governance, what does 'tone at the top' refer to?

Answer: The ethical culture and values demonstrated by senior leadership and the board

Tone at the top describes how senior executives and board members model ethical behavior, setting the cultural standard that cascades throughout the organization.

A pension fund votes against a company's board chair at the AGM due to poor climate governance. This action is an example of:

Answer: Proxy voting as an engagement tool

Voting against directors at annual general meetings is a key stewardship tool that institutional investors use to signal dissatisfaction with governance practices.

What governance principle does the 'comply-or-explain' approach embody?

Answer: Flexibility allowing companies to deviate from code provisions if they transparently explain the reasons

Comply-or-explain allows companies to tailor governance practices to their specific context, provided they transparently disclose any deviations and their rationale.