Corporate Governance & Ethics: 2026
Exam Prep
Leadership, Compliance & Stakeholder Strategy (100 Questions)
1. What is the fundamental definition of "Corporate Governance"?
A) The daily management of employees by supervisors
B) The system of rules, practices, and processes by which a firm is directed and controlled
C) The marketing strategy of a company
D) The tax filing process for corporations
Correct Answer: B) The system of rules, practices, and processes by which a firm is
directed and controlled
2. Which theory suggests that the primary responsibility of a firm is to maximize wealth
for its shareholders?
A) Stakeholder Theory
B) Shareholder Primacy (Friedman Doctrine)
C) Resource-Based View
D) Agency Theory
Correct Answer: B) Shareholder Primacy (Friedman Doctrine)
3. "Stakeholder Theory" argues that a corporation should create value for:
A) Only the shareholders
B) All groups affected by the firm (employees, customers, suppliers, community, and
shareholders)
C) Only the government
D) Only the senior management
Correct Answer: B) All groups affected by the firm (employees, customers, suppliers,
community, and shareholders)
4. What is the "Principal-Agent Problem"?
A) The conflict between the company and the government
B) The conflict of interest between shareholders (principals) and management (agents)
C) The conflict between two different suppliers
D) The conflict between customers and employees
Correct Answer: B) The conflict of interest between shareholders (principals) and
management (agents)
,5. "Fiduciary Duty" requires board members to act in the best interest of:
A) Themselves
B) The corporation and its shareholders
C) The government
D) Their friends
Correct Answer: B) The corporation and its shareholders
6. The "Duty of Care" requires directors to:
A) Make sure the office is clean
B) Make informed, prudent decisions based on available information
C) Always agree with the CEO
D) Spend as little time as possible on decisions
Correct Answer: B) Make informed, prudent decisions based on available information
7. The "Duty of Loyalty" prohibits directors from:
A) Attending board meetings
B) Engaging in self-dealing or putting personal interests above the company's interests
C) Hiring new staff
D) Using the company's computers
Correct Answer: B) Engaging in self-dealing or putting personal interests above the
company's interests
8. What is the "Business Judgment Rule"?
A) A rule that says the CEO is always right
B) A legal principle that protects directors from liability for business decisions made in good
faith, even if they result in losses
C) A rule that says the court will always review every decision
D) A rule that directors must be lawyers
Correct Answer: B) A legal principle that protects directors from liability for business
decisions made in good faith, even if they result in losses
9. In 2026, "ESG" stands for:
A) Economic, Strategic, Growth
B) Environmental, Social, and Governance
C) Electronic, System, Global
D) Employment, Safety, Guidance
Correct Answer: B) Environmental, Social, and Governance
10. Which of the following is an example of an "Environmental" (E) factor in ESG?
, A) Board diversity
B) Carbon footprint and resource management
C) Labor relations
D) Executive compensation
Correct Answer: B) Carbon footprint and resource management
11. Which of the following is a "Social" (S) factor in ESG?
A) Energy efficiency
B) Data privacy and human rights in the supply chain
C) Audit committee structure
D) Lobbying activities
Correct Answer: B) Data privacy and human rights in the supply chain
12. Which of the following is a "Governance" (G) factor in ESG?
A) Diversity of the board and executive pay structures
B) Water usage
C) Community engagement
D) Product safety
Correct Answer: A) Diversity of the board and executive pay structures
13. "Greenwashing" occurs when a company:
A) Paints its office green
B) Makes false or misleading claims about the environmental benefits of its products or
operations
C) Invests in solar energy
D) Plants trees near the factory
Correct Answer: B) Makes false or misleading claims about the environmental benefits of
its products or operations
14. An "Independent Director" is one who:
A) Has no material relationship with the company (other than being a director)
B) Is a relative of the CEO
C) Works as a full-time employee
D) Owns 50% of the company's stock
Correct Answer: A) Has no material relationship with the company (other than being a
director)
15. What is the primary role of the "Audit Committee"?
A) To plan the company's holiday party
B) To oversee financial reporting, internal controls, and the external audit process
C) To hire the CEO
D) To set the marketing budget
Correct Answer: B) To oversee financial reporting, internal controls, and the external
audit process
16. "Whistleblower Protection" laws encourage:
Exam Prep
Leadership, Compliance & Stakeholder Strategy (100 Questions)
1. What is the fundamental definition of "Corporate Governance"?
A) The daily management of employees by supervisors
B) The system of rules, practices, and processes by which a firm is directed and controlled
C) The marketing strategy of a company
D) The tax filing process for corporations
Correct Answer: B) The system of rules, practices, and processes by which a firm is
directed and controlled
2. Which theory suggests that the primary responsibility of a firm is to maximize wealth
for its shareholders?
A) Stakeholder Theory
B) Shareholder Primacy (Friedman Doctrine)
C) Resource-Based View
D) Agency Theory
Correct Answer: B) Shareholder Primacy (Friedman Doctrine)
3. "Stakeholder Theory" argues that a corporation should create value for:
A) Only the shareholders
B) All groups affected by the firm (employees, customers, suppliers, community, and
shareholders)
C) Only the government
D) Only the senior management
Correct Answer: B) All groups affected by the firm (employees, customers, suppliers,
community, and shareholders)
4. What is the "Principal-Agent Problem"?
A) The conflict between the company and the government
B) The conflict of interest between shareholders (principals) and management (agents)
C) The conflict between two different suppliers
D) The conflict between customers and employees
Correct Answer: B) The conflict of interest between shareholders (principals) and
management (agents)
,5. "Fiduciary Duty" requires board members to act in the best interest of:
A) Themselves
B) The corporation and its shareholders
C) The government
D) Their friends
Correct Answer: B) The corporation and its shareholders
6. The "Duty of Care" requires directors to:
A) Make sure the office is clean
B) Make informed, prudent decisions based on available information
C) Always agree with the CEO
D) Spend as little time as possible on decisions
Correct Answer: B) Make informed, prudent decisions based on available information
7. The "Duty of Loyalty" prohibits directors from:
A) Attending board meetings
B) Engaging in self-dealing or putting personal interests above the company's interests
C) Hiring new staff
D) Using the company's computers
Correct Answer: B) Engaging in self-dealing or putting personal interests above the
company's interests
8. What is the "Business Judgment Rule"?
A) A rule that says the CEO is always right
B) A legal principle that protects directors from liability for business decisions made in good
faith, even if they result in losses
C) A rule that says the court will always review every decision
D) A rule that directors must be lawyers
Correct Answer: B) A legal principle that protects directors from liability for business
decisions made in good faith, even if they result in losses
9. In 2026, "ESG" stands for:
A) Economic, Strategic, Growth
B) Environmental, Social, and Governance
C) Electronic, System, Global
D) Employment, Safety, Guidance
Correct Answer: B) Environmental, Social, and Governance
10. Which of the following is an example of an "Environmental" (E) factor in ESG?
, A) Board diversity
B) Carbon footprint and resource management
C) Labor relations
D) Executive compensation
Correct Answer: B) Carbon footprint and resource management
11. Which of the following is a "Social" (S) factor in ESG?
A) Energy efficiency
B) Data privacy and human rights in the supply chain
C) Audit committee structure
D) Lobbying activities
Correct Answer: B) Data privacy and human rights in the supply chain
12. Which of the following is a "Governance" (G) factor in ESG?
A) Diversity of the board and executive pay structures
B) Water usage
C) Community engagement
D) Product safety
Correct Answer: A) Diversity of the board and executive pay structures
13. "Greenwashing" occurs when a company:
A) Paints its office green
B) Makes false or misleading claims about the environmental benefits of its products or
operations
C) Invests in solar energy
D) Plants trees near the factory
Correct Answer: B) Makes false or misleading claims about the environmental benefits of
its products or operations
14. An "Independent Director" is one who:
A) Has no material relationship with the company (other than being a director)
B) Is a relative of the CEO
C) Works as a full-time employee
D) Owns 50% of the company's stock
Correct Answer: A) Has no material relationship with the company (other than being a
director)
15. What is the primary role of the "Audit Committee"?
A) To plan the company's holiday party
B) To oversee financial reporting, internal controls, and the external audit process
C) To hire the CEO
D) To set the marketing budget
Correct Answer: B) To oversee financial reporting, internal controls, and the external
audit process
16. "Whistleblower Protection" laws encourage:
