Ethics, Corporate Responsibility and Governance

Introduction and Context

Management is not only the process of achieving organizational objectives. It is also the exercise of authority over people, resources, information, and social relationships. Every managerial decision has consequences for employees, customers, investors, communities, suppliers, regulators, and the natural environment. Consequently, effective management must be responsible management.

Ethics concerns principles of right and wrong that guide conduct. Corporate responsibility concerns the obligations an organization has to society and to affected stakeholders. Corporate governance concerns the systems through which organizations are directed, controlled, monitored, and held accountable. These subjects are closely connected. Ethical values influence governance policies; governance structures shape accountability; and corporate responsibility translates organizational obligations into decisions and actions.

Ethical management is especially important in human resource management. HR professionals influence recruitment, selection, pay, promotion, discipline, privacy, workplace safety, diversity, employee voice, and termination. A technically legal decision may still be unfair, discriminatory, deceptive, or harmful. Managers therefore need more than rules: they need ethical reasoning, sound judgment, and systems that make responsible conduct likely.

Learning Objectives

By the end of this chapter, you should be able to:

1. Distinguish ethics, law, corporate responsibility, and corporate governance.
2. Explain major ethical theories and apply them to managerial dilemmas.
3. Use structured frameworks for ethical decision-making.
4. Describe the roles of boards, executives, internal controls, auditors, and stakeholders.
5. Explain accountability, compliance, whistleblowing, and speak-up systems.
6. Apply stakeholder, sustainability, and ESG perspectives to management decisions.
7. Evaluate an organizational dilemma and recommend a responsible course of action.

1. Foundations of Ethical Management

Ethics, morality, and law

Morality refers to beliefs about right and wrong held by individuals or communities. Ethics is the systematic examination of those beliefs and their implications for action. In management, business ethics applies ethical reasoning to organizational decisions and relationships.

Law consists of enforceable rules established by legitimate authorities. Ethics and law overlap, but they are not identical. Law establishes a minimum standard of conduct; ethics may require more. For example, a company may legally collect certain employee data, but ethical management requires asking whether collection is necessary, transparent, proportionate, and respectful of privacy.

A useful distinction is:

• Legal: permitted by applicable law.
• Ethical: justifiable according to defensible principles and stakeholder impacts.
• Responsible: attentive to long-term social, environmental, and organizational consequences.
• Unethical: violates important duties, rights, standards of fairness, or expectations of responsible conduct.

Why ethical problems arise

Ethical dilemmas occur when important values conflict. A manager may need to balance confidentiality against an employee’s safety, loyalty to a supervisor against honesty toward investors, or short-term cost reduction against employee welfare. Ethical risk increases when goals are aggressive, authority is concentrated, incentives reward only results, information is incomplete, and employees fear retaliation.

Common sources of ethical failure include:

• conflicts of interest;
• misuse of confidential information;
• discrimination and harassment;
• misleading communication;
• corruption and bribery;
• unsafe working conditions;
• exploitation in supply chains;
• manipulation of performance data;
• retaliation against employees who raise concerns; and
• environmental harm concealed from stakeholders.

Ethical culture is shaped by what leaders reward, tolerate, measure, and punish. A formal code of conduct is useful, but it cannot compensate for leaders who reward misconduct or ignore violations by high performers.

2. Major Ethical Theories

No single theory resolves every managerial dilemma. Theories provide different questions through which a decision can be examined.

Utilitarianism

Utilitarianism evaluates actions by their consequences. The morally preferable decision is generally the one expected to produce the greatest overall benefit or the least overall harm for affected parties.

A manager applying utilitarian reasoning should identify stakeholders, estimate significant benefits and harms, consider their probability and duration, and compare alternatives. This approach is useful for evaluating safety investments, restructuring, product recalls, and resource allocation.

Its limitation is that aggregate benefits may conceal serious harm to a minority. For example, a policy that benefits most employees may still violate the rights of a small group. Consequences are also difficult to predict and measure accurately.

Deontological ethics

Deontological ethics emphasizes duties, principles, and respect for persons. Some actions are wrong even if they produce attractive outcomes. Managers should ask whether they are telling the truth, honoring promises, respecting rights, and treating people as ends rather than merely as instruments.

This perspective is particularly relevant to informed consent, privacy, non-discrimination, truthful reporting, and fair procedures. Its limitation is that duties can conflict. A manager may have duties of confidentiality and safety at the same time, requiring careful judgment about which duty has priority.

Justice and fairness

Justice theories focus on the fair distribution of benefits and burdens, fair procedures, and fair treatment. Three forms are especially relevant:

• Distributive justice: whether outcomes such as pay, promotions, and workloads are distributed fairly.
• Procedural justice: whether the process used to reach a decision is consistent, transparent, unbiased, and reviewable.
• Interactional justice: whether people are treated with dignity and given respectful explanations.

In HR, fairness does not always mean identical treatment. Equitable treatment may require reasonable accommodation or corrective action to address unequal starting conditions.

Virtue ethics

Virtue ethics asks what a good professional or organization would do and what character traits are being developed. Relevant virtues include honesty, courage, prudence, fairness, humility, compassion, and accountability.

Virtue ethics draws attention to habits and organizational character. A company that repeatedly hides problems may develop a culture of deception, even if each individual action appears minor. Its limitation is that people may disagree about which virtues should guide a specific decision.

Ethics of care

The ethics of care emphasizes relationships, vulnerability, empathy, and responsibilities arising from dependence. It challenges purely abstract decision-making by asking who may be especially vulnerable and how relationships will be affected.

This approach is valuable in employee support, workplace conflict, layoffs, disability accommodation, and community engagement. It should not, however, become favoritism or replace consistent standards.

Rights-based and stakeholder approaches

A rights-based approach protects fundamental interests such as privacy, safety, freedom from discrimination, freedom of association, and freedom from coercion. Stakeholder theory asks managers to consider all groups that affect or are affected by organizational activity, rather than treating shareholder returns as the sole objective.

These theories complement one another. A robust decision may satisfy a duty, protect rights, distribute burdens fairly, reduce harm, and demonstrate appropriate organizational character.

3. An Ethical Decision-Making Framework

Ethical decisions should be approached systematically rather than intuitively alone. The following framework can be used by managers and HR professionals.

Step 1: Recognize the ethical issue

Identify what makes the situation morally significant. Is there possible harm, deception, discrimination, coercion, conflict of interest, rights violation, or misuse of power? A problem initially presented as a financial or operational issue may also be an ethical issue.

Step 2: Establish the facts

Separate verified facts from assumptions. Identify what is known, unknown, disputed, or confidential. Check relevant policies, contracts, laws, professional standards, and organizational commitments.

Step 3: Identify stakeholders and duties

List those affected directly and indirectly. Consider employees, managers, customers, shareholders, suppliers, communities, regulators, and future generations. Identify duties, rights, promises, dependencies, and power differences.

Step 4: Generate alternatives

Avoid assuming that the only choices are immediate compliance or refusal. Alternatives may include delaying a decision, obtaining independent advice, changing the process, disclosing information, protecting a vulnerable person, or escalating the issue.

Step 5: Test the alternatives

Each option should be examined through multiple lenses:

• What consequences are likely?
• Does the option respect rights and duties?
• Is the process fair and explainable?
• Would the decision be defensible if publicly disclosed?
• What does it reveal about organizational character?
• Does it protect vulnerable stakeholders?
• Is it consistent with the organization’s stated values?

Step 6: Decide and document

Select the most defensible option, explain the reasoning, identify safeguards, and document relevant evidence. Documentation supports accountability and enables later review.

Step 7: Implement and review

Communicate the decision appropriately, monitor consequences, provide an appeal or reporting route, and revise the decision if new information emerges. Ethical responsibility continues after the initial choice.

A useful practical test is the disclosure test: Would the decision remain acceptable if accurately described to employees, regulators, customers, and the public? This is not a complete ethical test, but discomfort under transparent review may indicate hidden risks.

4. Corporate Responsibility and Stakeholder Management

Corporate responsibility refers to an organization’s responsibility for the effects of its decisions and activities on people, society, and the environment. It includes legal compliance, ethical conduct, respect for human rights, responsible employment, environmental stewardship, and contribution to sustainable development.

Shareholders and stakeholders

Shareholders provide capital and have legitimate interests in returns and risk management. Stakeholders include any group that affects or is affected by the organization. Important stakeholders may include:

• employees and their families;
• customers and service users;
• owners and investors;
• suppliers and contractors;
• local communities;
• governments and regulators;
• civil society organizations; and
• the natural environment and future generations.

Stakeholder management is not simply an exercise in satisfying every demand. Interests may conflict, and resources are limited. The manager’s responsibility is to identify legitimate interests, assess impacts, communicate honestly, and make decisions that can be justified through fair and transparent processes.

Corporate social responsibility

Corporate social responsibility, or CSR, traditionally describes voluntary and organizational efforts to address social and environmental responsibilities beyond immediate profit-making. CSR may involve fair employment, community investment, responsible sourcing, accessibility, environmental programs, or human rights due diligence.

CSR becomes weak when it is disconnected from core operations. A company cannot credibly promote community welfare while tolerating unsafe factories or wage theft in its supply chain. Responsible management integrates social and environmental considerations into strategy, procurement, operations, HR, risk management, and performance evaluation.

Sustainability and the triple bottom line

Sustainability involves meeting present needs without undermining the ability of future generations to meet their needs. The triple bottom line highlights three dimensions:

• economic viability;
• social well-being; and
• environmental integrity.

These dimensions are interdependent. For example, high employee turnover may be an HR problem, a financial cost, and an indicator of poor social sustainability. Sustainable management therefore considers both immediate performance and long-term resilience.

5. Environmental, Social and Governance (ESG)

ESG is a framework for organizing and evaluating material environmental, social, and governance issues that may affect organizational performance, stakeholder welfare, and long-term value.

Environmental factors

Environmental issues include greenhouse-gas emissions, energy use, water consumption, waste, pollution, biodiversity, and climate-related risk. Managers should distinguish between direct operational impacts and indirect impacts in the supply chain and product life cycle.

Social factors

Social factors include labor standards, health and safety, diversity and inclusion, human rights, data privacy, product safety, community effects, and supply-chain labor conditions. HR is central to the social dimension because workforce practices are both a source of risk and a source of organizational capability.

Governance factors

Governance includes board independence, executive compensation, audit quality, anti-corruption systems, risk oversight, internal controls, shareholder rights, transparency, and stakeholder accountability.

ESG should not be confused with public relations. High-quality ESG management requires materiality assessment, reliable data, defined responsibilities, measurable targets, controls, and transparent reporting. Greenwashing occurs when an organization exaggerates or misrepresents environmental performance. Similar misrepresentation may occur in social or governance claims.

ESG ratings can differ because agencies use different definitions, weights, data sources, and time horizons. Managers should therefore examine the underlying evidence rather than treating a rating as an objective measure of ethical performance.

6. Corporate Governance

Corporate governance is the system by which organizations are directed and controlled. It allocates authority, establishes oversight, manages conflicts of interest, and creates mechanisms for accountability.

The agency problem

In a corporation, owners often delegate decision-making to executives. This separation creates an agency relationship. Managers may possess more information than owners and may pursue personal interests, such as excessive compensation, prestige, or short-term results. Governance mechanisms seek to align interests and reduce information asymmetry.

Important mechanisms include board oversight, independent audits, internal controls, executive incentives, disclosure, shareholder voting, risk committees, and legal accountability. No mechanism is perfect. Incentives can encourage manipulation if they focus narrowly on short-term targets.

The board of directors

The board typically oversees strategy, risk, executive succession, financial integrity, legal and ethical compliance, and organizational performance. It should challenge management constructively rather than merely approve management proposals.

Effective boards require appropriate expertise, independence, diversity of perspective, access to reliable information, and a culture in which challenge is permitted. Board committees may focus on audit, risk, remuneration, nominations, or sustainability, depending on the organization and applicable law.

Internal control and the three lines model

Internal control consists of policies and procedures designed to provide reasonable assurance that objectives relating to operations, reporting, and compliance will be achieved. Controls may include authorization requirements, segregation of duties, reconciliations, access restrictions, training, monitoring, and investigation procedures.

A widely used governance perspective distinguishes three lines:

1. Operational management owns risks and controls in daily activities.
2. Risk, compliance, and control functions provide expertise, monitoring, and challenge.
3. Internal audit provides independent assurance to senior governance bodies.

External auditors provide independent assurance on specified financial or other information, but they do not replace management’s responsibility for controls or ethical conduct.

Accountability and transparency

Accountability means being answerable for decisions, actions, and results. It requires clearly assigned responsibilities, information flows, review mechanisms, consequences for misconduct, and opportunities for challenge or appeal.

Transparency means providing relevant, accurate, understandable, and timely information. Transparency does not require disclosure of every confidential detail. Responsible disclosure balances openness with privacy, security, legal duties, and legitimate commercial confidentiality.

7. Compliance, Whistleblowing and Speak-Up Systems

Compliance is the process of meeting applicable laws, regulations, standards, contracts, and organizational policies. A compliance program commonly includes risk assessment, policies, training, advice, monitoring, reporting channels, investigation, remediation, and disciplinary measures.

A compliance-based approach asks, “What is permitted?” An integrity-based approach also asks, “What is responsible?” Strong organizations use both. Compliance without ethical judgment can produce technical rule-following while harmful conduct continues in gaps between rules.

Whistleblowing

Whistleblowing occurs when a person reports suspected wrongdoing through internal or external channels. Reports may concern fraud, corruption, safety risks, discrimination, regulatory violations, environmental harm, or retaliation.

An effective speak-up system should provide:

• accessible reporting channels;
• confidentiality where feasible;
• protection against retaliation;
• impartial triage and investigation;
• timely communication with the reporter;
• evidence preservation;
• documented outcomes; and
• corrective action when allegations are substantiated.

Managers should not promise absolute confidentiality if disclosure may be legally necessary. They should explain how information will be handled and refer serious allegations to authorized investigators.

Whistleblowing systems fail when employees believe reports will be ignored, leaked, or punished. Organizational culture is therefore as important as the reporting technology. Retaliation may include dismissal, demotion, exclusion, threats, undesirable assignments, poor evaluations, or informal career damage.

8. Ethics in Human Resource Management

HR decisions often involve unequal power, personal information, and life-changing consequences. Ethical HR practice requires both technical competence and moral judgment.

Recruitment and selection

Selection systems should use job-related criteria, consistent procedures, trained assessors, and appropriate documentation. Managers should avoid discrimination, misleading job advertisements, unnecessary collection of personal data, and favoritism. Automated screening tools require validation, monitoring for adverse effects, explainability, and human review.

Pay and performance management

Fair pay requires attention to job value, market conditions, internal equity, legal requirements, and equal pay principles. Performance systems should use relevant evidence, provide feedback, permit employee voice, and avoid impossible targets that encourage misconduct.

Privacy and employee data

Organizations should collect only data needed for legitimate purposes, inform employees about use, restrict access, secure records, define retention periods, and provide appropriate rights of review or correction. Monitoring technologies can create ethical concerns when they are excessive, opaque, inaccurate, or used beyond the original purpose.

Discipline and termination

Disciplinary processes should be based on evidence, consistent standards, proportionality, notice, and an opportunity to respond. Termination decisions require legal review where appropriate, humane communication, protection of dignity, and attention to foreseeable consequences.

9. Technology and Artificial Intelligence

Digital systems can improve compliance monitoring, recruitment, fraud detection, and sustainability reporting, but they can also amplify bias and obscure accountability. Ethical technology governance requires:

• a clearly defined legitimate purpose;
• data quality and representativeness;
• privacy and security safeguards;
• testing for discriminatory effects;
• explainability appropriate to the decision’s impact;
• human oversight and appeal;
• documentation of model limitations; and
• ongoing monitoring after deployment.

An organization remains responsible for decisions made with an automated tool. “The algorithm decided” is not an adequate accountability explanation. High-impact employment decisions should not rely solely on unreviewed automated recommendations.

10. Illustrative Case: The Safety Dashboard

Background

A fictional manufacturing company, Northstar Components, introduces a dashboard linking plant managers’ bonuses to reported workplace incidents. The stated objective is to improve safety. Within six months, reported incidents decline by 35 percent. However, the HR director learns that supervisors have discouraged employees from reporting minor injuries and have reclassified some incidents as non-work-related.

Problem

The chief operating officer argues that the dashboard is working and proposes expanding it. The HR director must decide whether to challenge the system, how to protect employees, and how to advise the board.

Analysis

The apparent improvement is not reliable evidence of improved safety. The incentive has created a conflict between reporting truthfully and protecting managerial bonuses. The issue involves duties of honesty, employee safety, procedural fairness, and governance accountability.

A utilitarian analysis recognizes that under-reporting may create severe future harm despite short-term improvements in reported statistics. A deontological analysis identifies a duty not to manipulate safety information. A justice analysis asks whether employees can report injuries without fear and whether risks are distributed fairly. A stakeholder analysis includes workers, managers, shareholders, regulators, families, and communities.

The dashboard also reveals a control weakness: the organization measures an outcome without validating the measurement process. A better safety scorecard would combine incident data with leading indicators such as hazard inspections, corrective-action completion, training quality, near-miss reporting, employee safety climate, and independent audits. Near-miss reporting should not automatically reduce bonuses; otherwise employees may conceal useful information.

Approach and solution

The HR director should confidentially document the evidence, notify the appropriate compliance or audit committee, recommend an independent investigation, and protect employees who report retaliation. The bonus formula should be suspended or redesigned while the investigation proceeds. The company should verify injury records, interview employees, inspect worksites, and correct classifications.

A redesigned system should reward hazard identification and verified corrective action rather than simply minimizing reported incidents. Managers should be evaluated partly on whether employees trust the reporting system and whether risks are reduced through documented controls.

Outcome

In this illustrative case, the investigation finds systematic under-reporting. Northstar corrects records, disciplines supervisors who retaliated, compensates affected employees where appropriate, and introduces independent safety audits. Reported incidents initially increase, but serious injuries decline over the following year. The board receives quarterly reports on both lagging and leading safety indicators.

Learning points

1. A metric can become dysfunctional when rewards are tied narrowly to it.
2. Low reporting does not necessarily mean low risk.
3. Ethical governance requires examining how data are produced, not merely reviewing the numbers.
4. Speak-up protection is essential to reliable organizational information.
5. Responsible performance systems balance results, processes, and stakeholder welfare.

Challenges and Limitations

Ethical management is difficult because information is incomplete, interests conflict, and consequences may be uncertain. Global organizations face differing legal systems, cultural expectations, labor standards, and enforcement capacity. Managers must avoid both ethical relativism, which treats any practice as acceptable because it is locally common, and ethical imperialism, which imposes unnecessary assumptions without understanding local context.

ESG and CSR initiatives can become symbolic if they are not connected to budgets, incentives, controls, and operational decisions. Governance systems can also create false confidence when boards receive polished reports that omit bad news. Codes of conduct may fail if training is generic, reporting channels are inaccessible, or leaders receive exemptions.

Ethical reasoning cannot eliminate disagreement. Its purpose is to make assumptions visible, improve the quality of judgment, protect affected parties, and create decisions that can withstand scrutiny.

Best Practices for Responsible Managers

Responsible managers should:

• model the behavior expected from others;
• clarify ethical responsibilities in goals and job roles;
• reward responsible processes, not only outcomes;
• invite dissent and constructive challenge;
• separate investigation from conflicts of interest;
• document significant decisions and evidence;
• protect confidentiality and prevent retaliation;
• use reliable, independently checked data;
• assess impacts on vulnerable stakeholders;
• integrate ESG and human rights into core operations;
• review automated tools for bias and accountability; and
• learn from incidents instead of hiding them.

Chapter Summary

Ethics, corporate responsibility, and governance are essential dimensions of management. Ethics provides principles for judging conduct; law establishes enforceable minimum standards; corporate responsibility addresses organizational impacts on stakeholders and society; and governance creates structures for direction, oversight, control, and accountability.

Utilitarian, deontological, justice, virtue, care, rights-based, and stakeholder theories provide complementary approaches to managerial dilemmas. A structured decision process involves recognizing the issue, establishing facts, identifying stakeholders and duties, generating alternatives, testing consequences and principles, deciding transparently, and reviewing outcomes.

Corporate governance addresses agency problems, board oversight, internal control, risk management, audit, disclosure, and accountability. Compliance programs are necessary but should be supported by an integrity-based culture. Whistleblowing systems require accessible channels, confidentiality, fair investigation, and protection from retaliation.

CSR, sustainability, and ESG require integration into strategy and operations rather than symbolic communication. HR managers have particular responsibilities concerning fair selection, pay, privacy, performance management, discipline, employee voice, and responsible use of AI. Finally, performance measures must be designed carefully because poorly chosen incentives can encourage concealment and misconduct rather than genuine improvement.

Key Terms

Accountability: The obligation to explain decisions, accept responsibility, and face appropriate consequences.

Agency problem: A conflict arising when managers’ interests may differ from those of owners or principals.

Business ethics: The application of ethical reasoning to organizational decisions and conduct.

Compliance: Conformance with applicable laws, regulations, standards, contracts, and policies.

Corporate governance: The system by which an organization is directed, controlled, and held accountable.

Corporate responsibility: Responsibility for the effects of organizational decisions and activities on society and the environment.

Deontological ethics: An ethical approach emphasizing duties, rules, and respect for persons.

Distributive justice: Fairness in the distribution of benefits, burdens, opportunities, and outcomes.

ESG: Environmental, social, and governance factors used to assess organizational impacts and long-term risks and opportunities.

Ethics: The systematic examination of principles concerning right and wrong conduct.

Greenwashing: Misleading claims about an organization’s environmental performance.

Internal control: Policies and procedures designed to provide reasonable assurance regarding operations, reporting, and compliance.

Justice ethics: An approach focused on fair outcomes, processes, and treatment.

Stakeholder: A person or group that affects or is affected by an organization.

Stakeholder theory: The view that management should consider the legitimate interests of multiple affected groups.

Sustainability: Meeting present needs without undermining future generations’ ability to meet their needs.

Utilitarianism: An approach that evaluates actions according to their expected overall consequences.

Virtue ethics: An approach that evaluates character, habits, and the qualities of a good professional or organization.

Whistleblowing: Reporting suspected wrongdoing through internal or external channels.

Review Questions

Short Answer Questions

1. How do ethics and law differ in managerial decision-making?
2. What is the purpose of corporate governance?
3. Distinguish distributive, procedural, and interactional justice.
4. What protections should an effective whistleblowing system provide?
5. Why can a low number of reported incidents be an unreliable safety indicator?

Long Answer Questions

1. Compare utilitarian, deontological, justice, virtue, and stakeholder approaches to ethical decision-making.
2. Explain how boards, internal controls, compliance functions, and internal audit contribute to accountability.
3. Discuss the relationship between CSR, sustainability, and ESG, including the risk of greenwashing.
4. Explain the ethical responsibilities of HR managers in recruitment, employee data management, performance evaluation, and termination.
5. Evaluate the limitations of codes of conduct and propose ways to develop an ethical organizational culture.

Analytical / Application Questions

1. A manager discovers that an automated recruitment tool rejects applicants from one demographic group at a higher rate. Apply the ethical decision-making framework and recommend actions.
2. A supplier offers a purchasing manager an expensive gift shortly before a contract decision. Analyze the situation using duty, consequences, fairness, and stakeholder perspectives.
3. An organization reports excellent ESG performance but refuses to disclose its labor-audit methodology. What governance and accountability questions should stakeholders ask?

Multiple Choice Questions with Answers

Question 1

Which statement best distinguishes ethics from law?

A. Ethics concerns only personal beliefs, whereas law concerns only organizations.

B. Law establishes enforceable minimum standards, while ethics may require broader justification.

C. Ethics is always legally enforceable, while law is voluntary.

D. There is no meaningful distinction between ethics and law.

Correct Answer: B. Law establishes enforceable minimum standards, while ethics may require broader justification.

Question 2

Which ethical theory evaluates an action primarily by its overall benefits and harms?

A. Deontological ethics

B. Virtue ethics

C. Utilitarianism

D. Rights-based ethics

Correct Answer: C. Utilitarianism

Question 3

Which form of justice concerns whether the process used to reach a decision is fair and unbiased?

A. Distributive justice

B. Procedural justice

C. Interactional justice

D. Corrective justice

Correct Answer: B. Procedural justice

Question 4

Which activity is normally associated with the board of directors?

A. Personally performing every operational task

B. Approving all employee leave requests

C. Overseeing strategy, risk, executive succession, and accountability

D. Replacing the organization’s internal control system

Correct Answer: C. Overseeing strategy, risk, executive succession, and accountability

Question 5

What is a central risk of linking managers’ bonuses only to the reduction of reported safety incidents?

A. Managers may encourage more accurate reporting.

B. Managers may conceal or reclassify incidents.

C. Employees will necessarily receive higher wages.

D. External auditors will automatically become responsible for safety.

Correct Answer: B. Managers may conceal or reclassify incidents.

Question 6

Which statement best describes ESG?

A. A framework limited to environmental emissions.

B. A legal system that replaces corporate governance.

C. A framework covering environmental, social, and governance issues.

D. A method for measuring only quarterly shareholder returns.

Correct Answer: C. A framework covering environmental, social, and governance issues.

Question 7

Which feature is essential to an effective whistleblowing system?

A. Automatic dismissal of every person named in a report

B. A guarantee that no report will ever be investigated

C. Protection against retaliation and impartial investigation

D. Public disclosure of the reporter’s identity in every case

Correct Answer: C. Protection against retaliation and impartial investigation

Question 8

What is greenwashing?

A. Reducing energy use through verified operational changes

B. Misrepresenting or exaggerating environmental performance

C. Auditing financial statements for environmental expenses

D. Training employees in workplace safety

Correct Answer: B. Misrepresenting or exaggerating environmental performance

Question 9

Which practice best supports ethical use of AI in employment decisions?

A. Using automated recommendations without human review

B. Ignoring potential bias if the system increases speed

C. Testing for discriminatory effects and providing oversight and appeal

D. Keeping the system’s purpose unknown to employees and applicants

Correct Answer: C. Testing for discriminatory effects and providing oversight and appeal

Question 10

Which option is an example of a leading safety indicator?

A. The number of serious injuries recorded last year

B. The number of workers already hospitalized

C. The completion rate of verified corrective actions

D. The total cost of past compensation claims

Correct Answer: C. The completion rate of verified corrective actions