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CFA Level I · CFA Level I Exam · Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits

Which of the following is most likely a function of an independent whistleblowing channel within the stakeholder management infrastructure?

An independent whistleblowing channel most likely allows employees to report misconduct without fear of retaliation. It helps detect fraud and unethical behavior early and protects stakeholders. Setting board pay and deciding capital structure are board and management responsibilities, unrelated to a reporting channel.

  1. ASetting the board's compensation policy
  2. BAllowing employees to report misconduct without fear of retaliationCorrect
  3. CDetermining the firm's optimal capital structure

Explanation

Whistleblowing policies provide employees a protected route to report unethical or illegal conduct, supporting protection of stakeholders and the firm. Compensation policy and capital structure are decisions made by the board and management, not functions of a reporting channel.

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