> Is the CEO reponsible if the manager cheated and deliberately hid facts from the upper management, just to please them and make himself look better?

Morally, certainly yes, that’s why they’re the CEO. Their only defence against responsibility is incapacity to fulfil their duties, in which case they should resign immediately.

It is naive to believe a CEO can know about everything. The job is to get out of the habit of running the company day to day, and focus on vision, strategy, and culture. It is entirely possible for the management levels below him to ignore orders, and cheat measures out in place to ensure this. As long as the CEO act accordingly when knowledge about this reaches him, he is doing a proper job. It will never be possible to totally control things with an orginazation so large that you need several layers of management. You do put trust into the lower layers, no matter how you do it.

Right, but the CEO needs to instill a culture of not cheating. If the CEO has that culture (and can show it - lots of ethics training and other decisions that reinforce the idea that the company doesn't violate those rules) then you go down the chain to the rouge manager who hid his action.

This isn't just a theory. On of my companies competitors (I do not know which, I was just given it as an example) was caught bribing officials in China. After investigation it was decided that it was a rouge manager and not the CEO: they has a policy of not bribing, everyone was trained in recognizing how something (even a meal) could be seen as a bribe, and when other unethical action had been taken in the past the company took action to stop it and treated the whistle-blowers well. The CEO got off because he did everything in his power to ensure this wouldn't happen.

Exactly. Great example of why not to simply punish all the way to the top because they're "morally responsible".