Free Business Ethics and Corporate Governance MCQs with Answers
30 Business Ethics and Corporate Governance MCQs from Introduction to Business, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Business ethics applies principles such as honesty, fairness, responsibility and transparency to decisions involving employees, customers, investors, competitors and society. Corporate governance covers the board of directors, accountability, disclosure, internal controls, stakeholder interests, agency conflicts, corporate social responsibility, codes of conduct and whistleblowing.
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30 questions · page 2 of 2
- A. It transfers ownership to company employees
- B. It removes the need for financial reporting
- C. It strengthens independent oversight of management
- D. It guarantees higher annual profits
Explanation: Separate leadership roles reduce the concentration of authority in one person and allow the board to supervise management more…
Correct answer: It strengthens independent oversight of management- A. Purchasing shares through a registered stockbroker
- B. Buying shares after reading a published annual report
- C. Selling shares during a publicly announced market decline
- D. Buying shares using confidential price-sensitive information
Explanation: Insider trading involves trading securities while possessing material, non-public information.
Correct answer: Buying shares using confidential price-sensitive information- A. Acting in the company's interest rather than for personal gain
- B. Maximising the director's personal investment returns
- C. Avoiding every business decision involving financial risk
- D. Following every request made by the largest shareholder
Explanation: The duty of loyalty requires directors to put the company's interests before their own and manage conflicts honestly.
Correct answer: Acting in the company's interest rather than for personal gain- A. Replacing the company's external auditors every year
- B. Allowing shareholders to vote on key corporate matters
- C. Managing the company's daily production activities
- D. Setting the salaries of all operational employees
Explanation: An annual general meeting gives shareholders a formal opportunity to vote on matters such as director appointments, financial statements…
Correct answer: Allowing shareholders to vote on key corporate matters- A. A sale made by a company to an ordinary retail customer
- B. A transaction between two unrelated companies at market price
- C. A transaction between a company and a connected person or entity
- D. A purchase completed through a licensed commercial bank
Explanation: A related-party transaction involves the company and a director, officer, major shareholder, or an entity connected with them.
Correct answer: A transaction between a company and a connected person or entity- A. Meeting society's expectations of moral conduct
- B. Supporting voluntary charitable projects
- C. Obeying laws imposed by public authorities
- D. Being profitable and financially sustainable
Explanation: Carroll places economic responsibility at the base because a business must remain financially viable to meet its other responsibilities.
Correct answer: Being profitable and financially sustainable- A. Releasing only information that presents the company positively
- B. Reporting information that could influence investor decisions
- C. Sharing important results privately with selected investors
- D. Publishing routine office notices before financial results
Explanation: Material information is information that a reasonable investor may consider important when making an investment decision.
Correct answer: Reporting information that could influence investor decisions- A. Utilitarian ethics
- B. Rights-based ethics
- C. Virtue ethics
- D. Ethical egoism
Explanation: Virtue ethics asks what a person of good character would do and emphasises qualities such as honesty, courage, and fairness.
Correct answer: Virtue ethics- A. It ensures that no company project can ever fail
- B. It allows directors to remove all uncertainty from business
- C. It transfers every business risk to external auditors
- D. It helps the board oversee threats to the company's objectives
Explanation: Effective risk management identifies, assesses, and controls significant threats so that the board can make informed decisions.
Correct answer: It helps the board oversee threats to the company's objectives- A. Managerial secrecy to protect competitive advantage
- B. Informed decision-making through timely disclosure
- C. Preferential treatment of controlling shareholders
- D. Delegation of voting rights to external auditors
Explanation: Timely disclosure of a significant legal dispute enables investors to assess the merger with relevant information.
Correct answer: Informed decision-making through timely disclosure