Question

Corporate governance as a director/officer role they assume certain obligations

a) Only to the shareholders
b) Solely to the government
c) Primarily to the employees
d) To both the corporation and its shareholders

Answer 1

Corporate governance entails obligations to both the corporation and its shareholders, involving directors, auditing firms, and significant investors in ensuring transparency and accountability.

Step-by-step explanation:

Directors and officers in a corporate setting should act in the best interests of both the corporation and its shareholders. Corporate governance involves a system of rules, practices, and procedures used to direct and control a company. The board of directors, which is elected by the shareholders, constitutes the primary governance mechanism to ensure corporate actions align with shareholder interests. Auditing firms and substantial outside investors, such as mutual and pension funds, also play critical roles in corporate governance. These entities work together to enhance accountability and prevent situations like the failure of Lehman Brothers, where corporate governance did not provide investors with accurate financial information about the company's operations.