CEA Stakeholder Rights & Responsibilities 4 — Questions and Answers
Question 1: A company knowingly contracts with a supplier that uses child labor. Which stakeholder accountability principle applies?
- Caveat emptor — buyer responsibility ends at contract signing
- Extended supply chain responsibility for upstream ethical violations (Correct answer)
- Arm's-length transaction insulates the buyer from supplier conduct
- Only host country laws govern supplier labor standards
Correct answer: Extended supply chain responsibility for upstream ethical violations
Ethical supply chain responsibility extends upstream — companies are accountable for foreseeable harms caused by suppliers they knowingly engage.
Question 2: A bank's fiduciary duty to depositors requires it to:
- Maximize risk-adjusted returns at all times
- Safeguard deposits and act in depositors' best financial interests (Correct answer)
- Invest solely in socially responsible assets
- Disclose all internal lending decisions to depositors
Correct answer: Safeguard deposits and act in depositors' best financial interests
Fiduciary duty to depositors means the bank must prioritize their financial security and interests, not merely maximize institutional profits.
Question 3: In a stakeholder conflict between profitability and worker safety, the CEA ethical framework favors:
- Profitability, since it sustains employment long-term
- A balanced approach that treats safety as a non-negotiable baseline (Correct answer)
- Worker majority vote on acceptable risk levels
- Regulatory minimum compliance as the ethical standard
Correct answer: A balanced approach that treats safety as a non-negotiable baseline
Worker safety is a baseline ethical obligation — not a factor to be traded off against profitability — while profitability is pursued within that constraint.
Question 4: Which stakeholder has a right to receive accurate, non-misleading financial disclosures from a publicly traded company?
- Only institutional investors
- Only the SEC and regulatory bodies
- All investors and potential investors (Correct answer)
- Only employees with stock options
Correct answer: All investors and potential investors
Securities law and ethical principles require that all investors — institutional and retail — receive accurate and non-misleading financial disclosures.
Question 5: The 'social license to operate' concept means a company must:
- Obtain government permits before starting operations
- Earn and maintain ongoing acceptance from affected communities (Correct answer)
- Register with international standards bodies
- Conduct annual environmental audits
Correct answer: Earn and maintain ongoing acceptance from affected communities
A social license to operate is an ongoing, informal grant of acceptance from communities affected by corporate activities, requiring continuous engagement.
Question 6: A manager discovers that marketing materials contain misleading claims that could harm customers. Her responsibility under stakeholder ethics is to:
- Defer to the marketing department's expertise
- Report and correct the misleading materials promptly (Correct answer)
- Wait for a customer complaint before acting
- Consult legal counsel before taking any internal action
Correct answer: Report and correct the misleading materials promptly
Managers have an affirmative duty to prevent foreseeable stakeholder harm, which requires proactive correction of misleading information.
Question 7: When companies adopt a multi-stakeholder governance model, boards typically become accountable to:
- Shareholders exclusively, as the legal owners
- A broader set including employees, customers, communities, and shareholders (Correct answer)
- Government regulators as primary principals
- International standards bodies such as the UN Global Compact
Correct answer: A broader set including employees, customers, communities, and shareholders
Multi-stakeholder governance models expand board accountability beyond shareholders to include all groups materially affected by the enterprise.
CEA Stakeholder Rights & Responsibilities 4
A company knowingly contracts with a supplier that uses child labor.
Which stakeholder accountability principle applies?