Deck 9: The Corporate Organization

Question 1

Directors are granted the statutory right to receive compensation for their services.

Answer 1

False

Question 2

A director may be personally liable for damag- es caused by

A) his or her failure to make the correct busi- ness decision.
B) his or her actions beyond the scope of the director's duty.
C) fraudulent or tortious acts committed by the others in the corporation that the director was reasonably unaware of.
D) his or her failure to vote on matters that personally involve the director.

Answer 2

B

Question 3

A(n) may be brought by one or more shareholders to enforce a corporate right, or to remedy a wrong to the corporation when the directors of the corporation fail or refuse to take appropriate action.

A) derivative action
B) class action
C) representative action
D) individual shareholder action

Answer 3

A

Question 4

The statutory authority granted to the board of directors to manage the business and affairs of the corporation is absolute and may not be limited in any way by the articles of incorporation or the corporate shareholders.

Question 5

The board of directors may not appoint a com- mittee to

A) oversee the compensation of the corpora- tion's officers and directors.
B) supervise the audit of the corporation's financial statements.
C) oversee any litigation the business may be involved in.
D) authorize dividends or distributions to the shareholders of the corporation.

Question 6

A(n) is an action brought by a share- holder on behalf of the shareholder and his or her entire class of shareholders against the cor- poration stemming from a cause of action belonging personally to the shareholder and the class the shareholder represents.

A) derivative action
B) class action
C) representative action
D) individual shareholder action

Question 7

The agenda for a meeting of the shareholders of a corporation would not usually include

A) ratification of the acts of the board of direc- tors for the previous year.
B) election of the corporation's officers.
C) election of the corporation's directors for the upcoming year.
D) amendments to the articles of incorporation.

Question 8

The issuance of stock of a corporation sometimes requires shareholder approval.

Question 9

A is the authority given by a share- holder to another to exercise the shareholder's voting rights.

A) proxy
B) ballot
C) quorum
D) voting grant

Question 10

Under the statutes of most states, annual meet- ings of the board of directors are mandatory.

Question 11

The method of voting that gives minority shareholders the right to cumulate their votes and increase their chances of electing a director is called

A) preemptive voting rights.
B) voting by ballot.
C) cumulative voting.
D) minority shareholder voting.

Question 12

Under the business judgment rule, directors may not be found personally liable to the corporation or third parties for their fraudulent acts if those acts were made on behalf of the corporation.

Question 13

In states following the Model Business Corporation Act, corporations must have a board of directors that consists of at least three directors.

Question 14

Reimbursement by a corporation to its officers and directors who are named as defendants in litigation involving the corporation for their expenses incurred in defending themselves is referred to as

A) litigation reimbursement.
B) director reimbursement.
C) personal liability reimbursement.
D) indemnification.

Question 15

Directors may be removed by the officers of the corporation.

Question 16

With the possible exception of statutory close corporations, all business corporations are required to elect a board of directors and to have a board of directors at all times.

Question 17

A shareholder's right to purchase newly issued shares of the corporation's stock in an amount proportionate to his or her current stock owner- ship is referred to as

A) the right of first refusal.
B) shareholder's purchase rights.
C) preemptive rights.
D) cumulative rights.

Question 18

The board of directors of a public corporation has oversight responsibility for the corpora- tion's business performance and plans.

Question 19

Corporate directors may be found personally liable for their poor business decisions that adversely affect the corporation, even if those decisions are made with diligence and in good faith.

Question 20

A director's duties to the corporation and shareholders do not include a

A) fiduciary duty.
B) duty of care.
C) duty to have firsthand knowledge of all business affairs of the corporation.
D) duty of loyalty.

Question 21

Misconduct by corporate executives can result in criminal prosecution of both the executives and the corporation.

Question 22

A quorum is the minimum number of individuals who must be present or represented at a meeting as a prerequisite to the valid transaction of business.

Question 23

Corporate managers often enact corporate compliance programs to help prevent and de- tect criminal conduct within their corporations.