Ethics & Corporate Governance Flashcards
7 cards from real RCMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics & Corporate Governance flashcards as text
Which governance structure element ensures that no single individual controls all aspects of a critical business process?
Answer: Segregation of duties
Segregation of duties divides key tasks among multiple people to reduce the risk of error or fraud going undetected.
A publicly traded company's board has seven members, five of whom have no material relationship with the company. Under NYSE listing standards, does this board meet the independence requirement?
Answer: Yes, because a majority of directors are independent
NYSE listing standards require that a majority of board members be independent directors.
When a compliance officer faces pressure from management to ignore a regulatory violation to avoid reputational damage, the BEST ethical course of action is to:
Answer: Document the pressure and escalate through established reporting channels
The compliance officer should document the pressure and escalate it through proper channels such as the audit committee or ethics hotline.
What is the primary distinction between a company's code of ethics and a code of conduct?
Answer: Codes of ethics articulate values and principles; codes of conduct specify required behaviors
A code of ethics states overarching values and moral principles, while a code of conduct translates those into specific behavioral rules.
Under the Federal Sentencing Guidelines, which factor can REDUCE a company's culpability score when a compliance violation is discovered?
Answer: Having an effective compliance and ethics program in place
The Federal Sentencing Guidelines reduce culpability scores for organizations that had an effective compliance program prior to the offense.
A director learns material non-public information about an acquisition target during a board meeting. Trading that company's stock before the announcement is prohibited under which law?
Answer: Securities Exchange Act Rule 10b-5 insider trading provisions
Trading on material non-public information violates Rule 10b-5 under the Securities Exchange Act, which prohibits insider trading.
Which of the following is an example of a 'clawback' provision in executive compensation governance?
Answer: Recovery of previously paid incentive compensation after a financial restatement
A clawback provision allows a company to recoup previously paid incentive compensation if it was based on misstated financial results.