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CMA Intermediate · Business Laws and Ethics · Business Ethics and Emotional Intelligence

Which statement best describes the link between business ethics and corporate governance?

Ethics provides the values such as integrity, fairness, transparency and accountability, while corporate governance supplies the structures and processes, like boards, committees and disclosures, that apply those values in directing and controlling a company. The two are complementary, and governance does not replace ethics, even for listed companies.

  1. ACorporate governance is concerned only with tax compliance, while ethics concerns only employees
  2. BEthics supplies the values, and corporate governance provides the structures and processes through which they are applied in directing and controlling a companyCorrect
  3. CEthics and corporate governance are unrelated, since governance is wholly legal
  4. DCorporate governance replaces ethics once a company is listed

Explanation

Governance is the system by which companies are directed and controlled, and sound ethical values underpin fairness, transparency and accountability within it. Governance is not limited to tax or law, and it does not displace ethics on listing.

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