Assessment of Skills and Knowledge(ASK) in Fundamental Business Concepts Practice Test

The main role of ethics in corporate governance is to create transparency and build stakeholder trust. Ethical standards guide organizations in their decision-making processes, ensuring that actions are fair, transparent, and accountable. This fosters a culture where stakeholders—including employees, customers, shareholders, and the community—feel respected and valued. By prioritizing ethics, companies can enhance their reputation, reduce risks of misconduct, and improve overall performance as stakeholder trust leads to longer-term commitments and support.

In contrast, the other options lack a comprehensive approach to corporate governance. Focusing solely on profit maximization overlooks the broader impact of business practices on society and the environment. Concentrating solely on financial results can lead to short-term thinking and ethical lapses that ultimately harm the company's sustainability. Mandating strict adherence to regulations alone does not encompass the ethical considerations that foster a positive corporate culture and engagement with stakeholders; companies must also go beyond compliance to promote ethical behavior and values.