NACD Certification Practice Exam

These questions are part of the practice quiz. Start practicing

• Which of the following incorrectly characterizes the approach directors should take regarding risk in today's business environment?
• Under the business judgment rule, which of the following actions is discouraged for directors?
• What is an effective way to engage board members in risk discussions?
• What does a risk assessment process typically involve?
• Publicly traded companies are required to have three standing committees. Which of the following is not a required committee for a publicly traded company?
• What significant change in corporate governance began in the 1990s?
• In evaluating the future workforce, which of the following is not a red flag from management?
• Which document typically reflects a company’s financial performance over a specific period?
• Which term describes a description and analysis of the most important risks inherent in an organization's strategy and business model?
• Which of the following is a key responsibility of a corporate director?
• In Example Company (TEC), what scenario may indicate risk accountability is not sufficiently defined?
• The compensation committee's role is to communicate internally and externally with the following groups except for which one?
• Generally, which one does not characterize an approach to skill that will matter the most in the future?
• Which of the following should boards monitor in order to gauge the effectiveness of a cybersecurity program?
• How does the board assist in aligning with the company's mission?
• What does the term 'fiduciary duty' imply for corporate directors?
• What is a key responsibility of the audit committee within a board?
• Which statement does not characterize the role of board committees appropriately?
• What is one of the roles of a formal board orientation program?
• Which statement is not accurate when considering future trends in board structure?
• Which of the following contemporary business issues is increasingly present in committee and board discussions?
• Which of the following is a critical component of effective compensation committee governance?
• Which of the following statements is inaccurate about why directors should continuously educate themselves on emerging trends?
• In the context of a talent management dashboard, which area of focus is least important to monitoring a company's development of human capital?
• What is the primary function of the nominating and governance committee?
• What benefit can bringing in an external compensation consultant provide to the entity?
• Which factor is crucial for the success of a board’s effectiveness?
• Why is effective communication crucial for a board of directors?
• Why is clear division of roles among standing committees essential in risk oversight?
• Generally, which of the following does not accurately characterize the term accounting as it is distinct from finance?
• What might happen if board members do not respect confidentiality?
• What is a key role of the board in corporate strategy?
• Referring to the strategy example of "a year in the boardroom," which of the following planning scenarios does not highlight specific examples of topics you might have from the standpoint of strategic focus?
• What is the primary focus of a company’s balance sheet?
• What is the primary focus of NACD Certification?
• All of the following are true about key components of the incidence-response plan except for which one?
• Which of the following is NOT recommended for public company communication with investors?
• Which of the following is NOT a key shift in US corporate governance from the early 1900s to today?
• Which of the following is the best approach to understanding what motivates shareholders?
• What is the primary function of a nominating committee in corporate governance?
• What approach helps a board ensure alignment with stakeholder interests?
• Why is stakeholder engagement important for corporate directors?
• How often should a nominating and governance committee evaluate board performance?
• Which of the following metrics would be least useful for a board to monitor management's creation of long-term value?
• Today, risk committees are required at which type of institutions?
• Which roles are consistent with being a director, not with being a manager?
• What does an 'executive session' in a board meeting refer to?
• Which action reflects a board's strong engagement in company strategy?
• In private company boards, what is the ideal composition regarding family members?
• In governance discussions, what does ESG stand for?
• Which scenario clearly differs from recommended practices regarding risk oversight?
• What is NACD's recommendation regarding director compensation?
• The following sample skill sets represent desired skills found in the board expertise matrix except for which one?
• What does the term 'inherent, asymmetric-information risk' refer to?
• Which best practice regarding board committees should be emphasized?
• Why is board diversity considered essential in contemporary governance?
• What roles do management and the board typically play in addressing potential risks?
• Which of the following is least likely to be a research project by the Public Company Accounting Oversight Board (PCAOB)?
• What is the significance of having an independent board member?
• According to NACD standards, what is a critical aspect of board composition?
• What indicates effective board support for a company’s mission?
• Which of the following is not one of the main financial statements that companies prepare to measure and report the results of their business activities?
• On the horizon for compensation committees are changes in the nature of compliance. Which of the following topics is not a compliance topic on the committee's horizon?
• What is one purpose of board evaluations?
• What key legislation significantly impacted corporate governance in the U.S.?
• Which trend is expected to create disruption according to a survey of directors?
• What is the role of technology in corporate governance today?
• Which of the following does not support the notion that directors should ask challenging questions of management?
• Which of the following exemplifies a "new rule" of business?
• In which circumstance would a board likely become concerned about risk culture?
• What is a common risk associated with inadequate governance practices?
• Why is confidentiality vital for board members within an organization?
• What is the significance of risk committees under the Dodd-Frank Act?
• Which committee typically oversees risk management in the absence of a dedicated risk committee?
• Which question to senior management is most relevant for assessing an organization's risk culture?
• What are related party transactions?
• What is the role of performance metrics in risk oversight?
• What is the purpose of a code of conduct in governance?
• What does NACD stand for?
• Which of the following is NOT an example of information a public company board should include in a proxy statement?
• What significant role does the audit committee typically play within a board?
• In risk oversight, what is the significance of having diverse viewpoints?
• How does a healthy board culture affect decision-making?
• What are the three essential roles of a board of directors?
• Which of the following is NOT a fundamental question for directors regarding the statement of cash flows?
• What is meant by the term 'governance risk'?
• The board's role in strategy is evolving due to all of the following except which one?
• What is 'shareholder activism'?
• Which takeaway for directors about corporate transformations is incorrect?
• What is an ideal outcome of efficient risk oversight?
• How does the statement of cash flows relate to the balance sheet and income statement?
• How should boards approach the topic of risk in their meetings?
• What does the income statement primarily tell us?
• Which practice reflects the best approach for boards regarding risk reporting?
• Which of the following statements about environmental issues is least likely to challenge the effectiveness of the audit committee?
• Which source, on its own, provides a director with sufficient information to engage in effective discussions of strategy?
• Which scenario best describes the future of the workforce?
• How can a board effectively manage stakeholder expectations?
• Which of the following statements is most accurate about the roles of standing board committees in risk oversight?
• How can boards effectively measure the success of their risk management strategies?
• Which statement about the definition of risk in today's business environment does not reflect the current view?
• Which attribute is essential for effective board leadership in challenging times?
• What does 'risk appetite' refer to?
• What training is vital for board members to effectively engage in risk oversight?
• Which of the following does not represent one of the significant oversight areas for the audit committee?
• How does keeping stakeholder information confidential benefit an organization?
• Which of the following is a hallmark of effective risk oversight?
• What is a common focus area for audit committees in publicly traded companies?
• What is a potential consequence of not providing a formal board orientation program for new members?
• How can boards ensure informed decision-making?
• Which governance framework is commonly referenced in corporate governance evaluations?
• What does 'board diversity' aim to enhance in decision-making?
• What is the primary focus of succession planning?
• Why might a company be considered at risk of governance failure?
• Strategy is transformational. Which of the following statements does not support the board's perspective about what strategy is?
• What is a primary benefit of effective board succession planning?
• What is the best advice for a director who has been away and is unprepared for an upcoming board meeting?
• Which of the following is an inaccurate statement of NACD principles about cyber-risk oversight for directors?
• Which of the following is NOT included in the income statement?
• What benefit does stakeholder feedback provide to board decisions?
• Which of the following best describes the fiduciary duties of directors?
• What is a common pitfall that boards should avoid during risk assessment?
• Which of the following terms is defined as "the behavioral norms of a company's personnel with regard to the risks presented by strategy execution and business operations?"
• What trend is commonly discussed in the context of boardroom dynamics?
• How can stakeholder feedback impact a company's strategic direction?
• Which of the following is not one of the three traditional board committees?
• Which standing board committee is most suitable for considering the implications of aggressive growth targets on risk?
• In the context of risk oversight, what is the purpose of separating agenda sessions?
• The renomination process asks the following questions except for which one?
• What does 'strategic risk management' involve for a board?
• How does a board assess the effectiveness of its governance policies?
• How should boards approach risk management in the digital age?
• What should a well-structured risk oversight meeting agenda focus on?
• Which model for a board's consideration of strategy does NACD recommend as the most effective?
• What is a good indicator of an effective risk management culture within an organization?
• Why is a corporate governance framework important?
• Which of the following is not an example of effective board meeting preparation?
• What question to senior management is most relevant for ensuring transparency in risk reporting?
• Both public and private company boards must prioritize CEO succession. Which of the following statements does not accurately reflect a key practice for CEO succession?
• Which situation most strongly indicates alignment of short-term strategies with long-term goals?
• In which type of committee is the independent director requirement particularly emphasized?
• How often should a board conduct a self-evaluation?
• What should a board do during the CEO succession planning process?
• Which of the following is the least effective example of a key metric a board should use to determine strategy and generate long-term value?
• Which statement is true regarding the importance of understanding emerging industry trends?
• In the 2018 Prudential financial proxy, which of the following headlines and information was not included?
• Which statement is not true of a new director's onboarding process?
• Which of the following is not a federal statute influencing corporate governance?
• What is the primary role of the audit committee in risk oversight?
• What is the role of management in risk management?
• Which of the following is not considered to be a component of the current risk landscape?
• Which of the following is not an accurate subset of NACD's 10 Key Agreed Principles?
• When is the most effective time for a board to discuss its organization's strategy?
• Which of the following statements does not accurately support a sound principle of shareholder communications?
• What role does the compensation committee play in corporate governance?
• Which of the following is not a strategic duty of the nominating and governance committee?
• According to NACD, how should board meetings be conducted?
• What is the most effective practice for boards regarding their organization's risk mitigation efforts?
• Which of the following is an inaccurate summary of what’s included in the mandate for the compensation committee's charter?
• Which of the following subjects should directors understand for effective strategy discussions?
• Which of the following is not a component for building a culture of security?
• What is considered the least effective approach to CEO succession planning?
• How should a board effectively manage conflicts of interest?
• To whom must a director ensure management has effectively communicated a change in direction after a facility closure?
• What illustrates an example of a healthy board culture?
• What is a critical component of establishing an effective risk oversight function within a board?
• Which concept is closely related to the 'duty of care' expected of directors?
• Which practice is considered beneficial for fostering a risk-aware culture in an organization?
• What does 'corporate social responsibility' (CSR) primarily involve?
• When it comes to data and privacy, how does the board define privacy?
• Which responsibility is assigned to the audit committee?
• What is "domain fronting"?
• What describes a recommended structure for a private, family-owned-company board?
• When companies evaluate their boards with a written evaluation and interview approach, it sends a message to directors to do what?
• Which case illustrates the oversight duty of directors in ensuring compliance with laws and regulations?
• What is a significant benefit of continuous director education?
• What is the minimum membership requirement for independent directors on the compensation committee?
• Which of the following actions should compensation committees take in response to evolving workplace expectations?
• Which one of the following does not describe the compensation committee’s responsibilities with respect to processes?
• Which of the following is stated incorrectly as a step and key component included in an effective enterprise risk management (ERM) framework?
• What is one common challenge in risk oversight for boards?
• Which of the following is most characteristic of the practice of improving governance processes continuously?
• A company might choose to go private for which of the following reasons?
• What is one key aspect that should be included in a board’s risk oversight process?
• What kind of adjustments can stakeholder feedback prompt in board strategy?
• Which of the following best describes a future opportunity for the Internet of Things (IoT)?
• Consider Tom Leppert's comments about what strategy is—and is not—from a board's perspective. Which of the following statements best reflects an effective approach to strategy?
• The module referred to a "checklist" of key metrics that are forward-looking or proactive in nature. Which of the following examples of metrics are not proactive or value-generating?
• Which of the following best practices is recommended for effective board governance?
• Which risk issue is not top of mind in today's boardroom?
• What is the purpose of proxy voting for shareholders?
• What signifies a healthy board culture?
• Why is it essential for boards to understand their regulatory environment?
• Which scenario most indicates an organization may have a weak risk culture?
• What does effective oversight in governance entail?
• Which of the following does not best support the board's evaluation of structure and process?
• Which term is defined as "the amount and type of risk that an organization is prepared to pursue to achieve its strategic objectives?"
• What should boards prioritize to effectively oversee strategic risks?
• What is a crucial aspect for effective board oversight of risk?
• Which of the following is not an example of a trending SEC "hot topic"?