Reading 50: The Corporate Governance of Listed Companies: A company, personal, included, corporate, 2011

1215

Session 11: Corporate Finance
Reading 50: The Corporate Governance of Listed Companies: A Manual for Investors

LOS e: Explain the provisions that should be included in a strong corporate code of ethics and the implications of a weak code of ethics with regard to related-party transactions and personal use of company assets.

 

 

A strong corporate code of ethics is vitally important. Which of the following statements concerning a firm’s code of ethics is least likely accurate?

A) A firm’s code of ethics sets standards for ethical conduct based on basic principles of integrity, trust and honesty.

B) A firm’s code of ethics should require clear disclosure of any advantages given to the firm’s insiders that are not also offered to shareholders.

C) As part of investor review of the firm’s ethical climate, investors should determine whether the firm gives the board access to relevant corporate information in a timely manner.

---

 

The firm’s code of ethics should prohibit practices that give advantages to company insiders that are not also offered to shareholders.

1215

Which of the following practices should be included in a firm’s code of ethics?

A) Prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.

B) Providing the board with relevant corporate information in a timely manner and prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.

C) Providing the board with relevant corporate information in a timely manner and allowing board members or other insiders to purchase stock before shareholders can make purchases.

---

The firm’s code of ethics establishes the basic principles of integrity, trust, and honesty. Two of the practices listed in the reading discuss providing the board with relevant corporate information in a timely manner and prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.