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 of the following scenarios best illustrates a 'related-party transaction' requiring board-level disclosure?
Answer: A company awards a consulting contract to a firm owned by the CEO's spouse
A contract with a firm owned by the CEO's spouse is a related-party transaction because it involves a director's family member and creates a potential conflict.
Under the concept of 'stakeholder theory,' corporate governance should primarily serve:
Answer: All parties affected by the company's operations, including employees, customers, and communities
Stakeholder theory holds that companies owe duties not only to shareholders but to all groups affected by their business activities.
An employee's manager directs them to falsify safety inspection records to avoid a costly shutdown. The employee's BEST first step under an ethical compliance framework is to:
Answer: Refuse and report the instruction through the ethics hotline or escalation chain
Refusing to falsify records and reporting the instruction through proper channels is the correct ethical and compliance response.
What is the purpose of an annual 'ethics attestation' that employees sign each year?
Answer: To confirm the employee has read the code of conduct and disclosed any known conflicts or violations
Ethics attestations confirm that employees have reviewed policies and require them to disclose any conflicts of interest or known violations.
Which of the following BEST describes the 'business judgment rule' in corporate law?
Answer: Courts will generally not second-guess informed, good-faith business decisions made by directors
The business judgment rule is a legal presumption that protects directors from personal liability for informed, good-faith decisions made in the company's interest.
A compliance program's effectiveness assessment should include which of the following elements?
Answer: Testing of controls, employee surveys, root cause analysis of incidents, and training completion metrics
An effective compliance program assessment combines quantitative metrics, control testing, cultural surveys, and root cause analyses to evaluate real-world effectiveness.
When a compliance officer disagrees with legal counsel's opinion that a questionable practice is permissible, the MOST appropriate action is to:
Answer: Document the disagreement, seek a second legal opinion if warranted, and escalate to leadership if the risk remains unresolved
The compliance officer should document the concern, consider seeking additional legal opinions, and escalate through governance channels if the risk is unresolved.