Certified in Healthcare Compliance (CHC) Practice Test

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Which case established that a corporate director may breach his or her fiduciary obligation by failing to faithfully institute a compliance and ethics program?

  1. Rush Prudential v. Moran (2002)

  2. Caremark International Derivative Litigation (1996)

  3. Washington State Medical Association v. Regence BlueShield (2007)

  4. Medical Association of Georgia v. BlueCross of Georgia (2000)

The correct answer is: Caremark International Derivative Litigation (1996)

The case that established that a corporate director may breach his or her fiduciary obligation by failing to faithfully institute a compliance and ethics program is Caremark International Derivative Litigation. This landmark case set a precedent in corporate governance, emphasizing the importance of compliance programs in healthcare organizations. The court found that the board of directors has an obligation to ensure that adequate internal controls are in place to prevent violations of law, and failure to establish such a compliance framework constitutes a breach of fiduciary duty. This case highlights the role of corporate directors in overseeing compliance efforts, making it clear that they must proactively engage in ensuring that their organization adheres to legal standards and ethical practices. The ruling underscored the idea that negligence in this area not only risks legal repercussions but also compromises the integrity of the organization itself. The significance of this case lies in its influence on how compliance programs are viewed in the context of corporate governance and the responsibilities of directors. In contrast, the other cases mentioned do not specifically address the fiduciary obligations related to compliance programs or do not have the same implications regarding directors’ responsibilities in this area. They may involve different aspects of healthcare laws or corporate governance but do not establish the same legal precedent concerning a director's duty to implement compliance and ethics programs.

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