Ch 5 Corporate Ethical Governance and Accountability

Question 1

How could you monitor compliance with a code of conduct in a corporation?

Answer 1

• Ethics audit or internal audit procedures
• Reviews by legal department
• Annual sign-offs by all or some employees
• Employee surveys

Question 2

What are key elements of a whistleblower system?

Answer 2

1) User-friendly
2) Confidential
3) Anonymous
4) Non-retaliatory
5) Independent

Question 3

Can an organization guarantee an employee who reports potential wrongdoing that he or she will not actually be retaliated against?

Answer 3

No

Question 4

What is the difference b/w ethics and compliance/

Answer 4

• Ethics: list of do’s, behaviors we aspire to

- Compliance: list of don’ts, rules we should not break

Question 5

What are the three most common whistleblower complaints?

Answer 5

1) Corporate disclosures and financials
2) Offering fraud
3) Manipulation

Question 6

What is the most common reporting channel for whistleblowers?

Answer 6

Supervisor

Question 7

What is the least common reporting channel for whistleblowers?

Answer 7

A government or regulatory authority

Question 8

Which of following is an inhibitor for reporting misconduct?

a) Employees don’t know about their rights
b) Companies retaliate against whistleblowers
c) Federal government is slow to respond to corruption revealed by whistleblowers
d) Two of the above
e) All of the above

Answer 8

e) All of the above

Question 9

What is a way that companies are empowering employees to report misconduct?

a) Educating employees about laws that protect them as whistleblowers
b) Creating a work environment where employees feel empowered
c) Designing programs to address misconduct by executives
d) Two of the above
e) All of the above

Answer 9

e) All of the above

Question 10

How can a corporation integrate ethical behavior into their reward and remuneration schemes?

Answer 10

• Rewards could be offered for outstanding performance, such as for assistance in revealing fraud
• Sanctions should be applied for wrongdoing, including disciplinary interviews, reduction of raises, fines, dismissal
• Annual goals may be employed to provide appropriate basis for positive reward/remuneration

Question 11

True or false.

In implementing an ethics program, an organization must have clear standards and fair treatment.

Answer 11

True

Question 12

Who should have a prominent role in developing an incentive and disciplinary system at an organization?

Answer 12

HR

Question 13

What is the most important contribution of a corporate code of conduct?

Answer 13

• Guidance to ensure min standards of behavior
• Protect the reputation of person, profession or organization
• So that no one can later say: “No one ever told me…” or “ I thought that’s what top management wanted”

Question 14

Why should codes focus on principles rather than specified detailed rules?

Answer 14

• Principles are susceptible to interpretation to give guidance to complex or newly emerging issues
• They are far easier to remember and therefore understand and use than an exhaustive, detailed listing of rules
• Few people would read, or could remember what they have read of such a list
• Code should be values based

Question 15

Are one or more of the fundamental principles found in codes more important the rest?

Answer 15

INTEGRITY

But all principles included in the code are equally important : honesty, fairness, compassion, integrity, predictability, and responsibility

Question 16

What are the elements of an ethics and compliance program?

Answer 16

1) Leadership and values
2) Ethics function
3) Risk assessment
4) Code
5) Ethics line
6) Advice and investigations
7) Discipline and incentives
8) Communication and training
9) Continuous improvement

Question 17

Explain why corporations are legally responsible to shareholders but are strategically responsible to other stakeholders as well.

Answer 17

Authors:
- According to stakeholder theory, corporations need the support of their stakeholders to reach their strategic objectives

Question 18

Corporations are now increasingly realizing that they are accountable:

a) Legally to shareholders
b) Legally to all stakeholders
c) Strategically to additional stakeholders
d) a and b
e) a and c

Answer 18

e) a and c

Question 19

What is the role of a board of directors from an ethical governance standpoint?

Answer 19

• Achievement of corporation’s strategic objectives to enhance S/H value
• Maintain the support of the company’s stakeholders to achieve goals
• BOD must build into the company a governance framework such objectives as growth, profitability in ST and LT

Question 20

Experience has revealed that, to be effective, a code must be reinforced by:

a) Tone at the top
b) Ethics officer and internal auditors
c) A comprehensive ethical culture
d) Principles, rules and examples
e) All of the above

Answer 20

e) All of the above

Question 21

When does a conflict of interest occur?

Answer 21

• When you owe a duty to someone/some organization, and you put your own interests ahead of the person/organization to whom/which you owe duty
• OR even the appearance of it

Question 22

This is the preferred approach to deal with conflicts of interests

a) Management
b) Disclosure
c) Remediation
d) Avoidance
e) Awareness

Answer 22

d) Avoidance

Question 23

What should an employee consider when considering whether to give or receive a gift?

Answer 23

1) Is it nominal or substantial?
2) What is the intended purpose?
3) What are the circumstances?
4) What is the position of sensitivity of recipient?
5) What is the accepted practice?
6) What is the firm/company policy?
7) Is it legal?

Question 24

How can a company control and manage conflicts of interest?

Answer 24

1) Ensure awareness through codes of conduct, and related initial and ongoing training
2) Create a program and an understanding of employer’s concerns regarding conflicts of interest, and major issues