Question

When the chief financial officer, or other executive, of a corporation is unsure whether a certain business action is legal, what should she do?

1) Seek legal advice before taking any action
2) Take the action and deal with any legal consequences later
3) Consult with other executives and make a collective decision
4) Ignore the uncertainty and proceed with the action

Answer 1

A CFO or other executive should seek legal advice if unsure about the legality of a business action to prevent potential legal and fiduciary breaches.

Step-by-step explanation:

When a chief financial officer (CFO) or other executive is uncertain about the legality of a business action, the most prudent step is to seek legal advice before proceeding. Acting without a clear understanding of the legal implications can lead to violations of fiduciary duties and substantial legal and financial consequences. Corporations have a legal obligation to their shareholders to operate within the bounds of the law, and executives are expected to exercise due diligence in this regard. The board of directors, as a part of corporate governance, is responsible for oversight and should ensure that such due diligence is followed.