Ethics & Governance – MT Revision May 2025

What is the primary focus of ethics in business decisions?

• Increasing profits using aggressive strategies

• Applying legal and regulatory compliance rules
  

• Acting with honesty, fairness and responsibility

• Following all company policies without question

Which of the following is the best objective of corporate governance?

• Maximizing wealth without disclosure to others

• Setting rules for daily operations and staffing

• Promoting transparency, fairness and control

• Avoiding tax liabilities through legal means

Which is NOT a component of a corporate governance framework?

• Audit committee and oversight processes

• Board of directors and shareholders’ rights

• Product branding and customer experience

• Risk management and internal controls

In agency theory, conflict often arises between:

• Owners and those who manage on behalf

• Auditors and external consultants

• Managers and the company directors

• Suppliers and the end product users

Stakeholder theory encourages companies to:

• Focus mainly on profit distribution
  

• Obey legal rules without exceptions

• Address interests of all stakeholders
  

• Consider only long-term investors

A board member recommends awarding a service contract to a company owned by her cousin, without informing the board of the relationship. What issue does this raise?

• Appropriate delegation of authority

• Effective stakeholder management

• Breach of transparency guidelines

• Conflict of interest in governance

Why is corruption considered harmful to good governance?

• It makes business deals more efficient

• It improves board independence levels

• It creates distrust and unfair advantage

• It lowers operating and tax burdens

What is a typical concern in concentrated ownership?

• Spread of voting rights is too equal

• Minority shareholders may lack voice

• The board holds too much autonomy

• Managers have no power to decide

Delegation of control within governance means:

• Shifting full legal liability elsewhere

• Assigning duties while staying liable

• Reducing control to avoid problems

• Passing decisions to external agents

A manager discovers that quarterly targets won’t be met. To protect his bonus, he inflates the reported sales figures. What ethical issue is involved?

• Failure to follow legal procedures

• Misuse of confidential reporting lines

• Breach of professional integrity and ethics

• Weakness in organizational structure