Deck 30: Management of a Corporation

Question 1

Directors do not need to be given advance notice of all regular board meetings.

Answer 1

True

Question 2

When directors vote on ordinary issues affecting the corporation, generally a two-thirds majority vote is required.

Answer 2

False

Question 3

The board of directors hires the corporation's officers.

Answer 3

True

Question 4

It is common practice to elect directors for 3-year terms with one-third of the directors being elected every year.

Question 5

Corporate officers do not act as agents of the corporation.

Question 6

The board of directors cannot delegate any of its functions to corporate officers.

Question 7

The primary function of a corporation's officers is to authorize major corporate policy decisions.

Question 8

Every corporation is governed by a committee of managerial employees.

Question 9

Corporate officers have responsibility for all policymaking decisions necessary to the management of corporate affairs.

Question 10

A board of directors normally can remove corporate officers at any time with or without cause.

Question 11

A director who becomes involved in litigation because of his or her position has to pay the costs because that director was part of the decision that led to the litigation.

Question 12

It is the responsibility of the s hareholde rs to hire or remove high level corporate officers.

Question 13

The number of directors who serve on a corporation's board is determined by its bylaws.

Question 14

In most states, an individual can hold only one corporate office.

Question 15

Directors decide when dividends are to be paid to shareholders.

Question 16

The initial board of directors of a corporation is normally appointed by the incorporators and serve until the first annual shareholders ' meeting.

Question 17

A director's right to access the corporation's books can be restricted by the corporate articles.

Question 18

A quorum is the minimum number of directors that must be present in person or via technology in order to make official decisions.

Question 19

A board of directors can hold special meetings so long as notice is sent to all directors, even if shareholders are not notified.

Question 20

Directors can be removed from their position if the shareholders do not re-elect them or during their term for misconduct.

Question 21

Sara and Tim form Urban Foods Inc. When it comes to managing Urban, the firm relies on

A) the board of directors.
B) the officers and the directors.
C) the officers.
D) the shareholders.

Question 22

Corporate directors or officers will be liable to the corporation or to its shareholders for business decisions that lose the company money even if they are careful in making the decisions.

Question 23

When directors and officers do not act in the best interests of their corporations, the shareholders may sue them on the company's behalf.

Question 24

Directors have a duty to be honest and to use prudent business judgment in the conduct of corporate affairs.

Question 25

Officers are not fiduciaries of the corporation.

Question 26

Directors and officers cannot be held personally liable for violations of statutes enacted to protect the environment.

Question 27

When directors delegate a responsibility to a corporate officer, the duty of care related to that responsibility also goes to the officer and the director no longer has that burden.

Question 28

Chad, Dill, and Eve are the first directors on the board of Face2Face Corporation, a social media host. Subsequent directors are elected by a majority vote of Face2Face's

A) incorporators.
B) directors.
C) officers.
D) shareholders.

Question 29

Generally a court will interfere with a business decision if that business decision causes a loss to the corporation.

Question 30

When directors delegate work to corporate officers, the directors are expected to oversee or supervise that work.

Question 31

Riley is elected as a director to the board of Salty Snacks, Inc. He will most likely serve for a term of one

A) decade.
B) four-year period.
C) lifetime.
D) year.

Question 32

Chief corporate executive officers are personally responsible for the accuracy of financial statements filed with the Securities and Exchange Commission.

Question 33

Directors and officers may be liable for negligence in the performance of their duties.

Question 34

Mike and Nora incorporate Onion Farm Inc. The number of directors who serve on Onion's board of directors is determined by its

A) articles of incorporation.
B) bylaws.
C) board of directors.
D) quorum.

Question 35

A director or officer must make a full disclosure of any conflict of interest with respect to a corporate contract.

Question 36

A corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgment if the officer or director uses due care.

Question 37

Directors can use confidential corporate information for personal advantage.

Question 38

Directors and officers are not liable for the torts and crimes of employees under their supervision.

Question 39

The business judgment rule immunizes corporate management from liability for any action.

Question 40

Kay and Leo form Metro Delivery Inc. Responsibility for all policymaking decisions necessary to the management of corporate affairs rests with Metro's

A) board of directors.
B) high-level managers.
C) chief executive officer.
D) shareholders.

Question 41

Nick, a director of Oil Inc., is specially trained in petroleum trading. Oil's board approves several deals in which the company pays too much for petroleum. Nick approves all the deals without first reviewing them. Nick is most likely liable for breach of

A) the duty of care.
B) the business judgment rule.
C) the duty of loyalty.
D) the bylaws.

Question 42

Olivia is a director of Property Managers Inc. As a director, with respect to the corporation, Olivia is

A) a fiduciary.
B) an actuary.
C) momentary.
D) statuary.

Question 43

Risk Insurance Inc. has a board of five directors. Risk's bylaws do not state any quorum requirements. In most states, a quorum for its board meetings would be

A) one director.
B) three directors.
C) four directors.
D) all of the directors.

Question 44

Freight Dispatch Corporation is a distribution company. Like most corporations, Freight's employees include its

A) directors.
B) incorporators.
C) officers.
D) shareholders.

Question 45

Most states define a quorum as

A) all of the directors authorized in the articles or bylaws.
B) a majority of the number authorized in the articles or bylaws.
C) any odd number of directors.
D) two directors.

Question 46

Rita is an officer of Savor Tea Inc. As a corporate officer, Rita's rights and duties primarily are defined by

A) employment contracts.
B) state statutes.
C) court review.
D) shareholder votes.

Question 47

As a director of InstaTalk Inc., Jim has a right of inspection. This right

A) can be restricted by the corporate articles.
B) can be restricted by the corporate bylaws.
C) can be restricted by an act of the board.
D) cannot be restricted.

Question 48

Oversight Inc.'s board of directors votes to empower corporate officers to make decisions regarding ordinary, daily corporate affairs within well-defined guidelines. With respect to these affairs, Oversight's board

A) is relieved of its responsibility.
B) retains its responsibility.
C) shares the responsibility.
D) was never responsible.

Question 49

Rikki is a director of STEM Inc. As a director, with respect to the corporation, Rikki is expected to use

A) prudent business judgment in the conduct of corporate affairs.
B) corporate funds for personal advantage.
C) confidential information for personal advantage.
D) her salary as an investment in corporate stocks or bonds .

Question 50

A vacancy occurs on the board of directors of Data Storage Inc. How the vacancy is filled most likely depends on Data's

A) articles of incorporation.
B) bylaws.
C) board of directors.
D) recorded minutes.

Question 51

Owen is a director of Packaging Company. As a director, Owen's rights include a right to

A) access the corporation's books, records, facilities, and other property.
B) subordinate the corporation's welfare to his personal interest.
C) use confidential corporate information for personal advantage.
D) self-dealing.

Question 52

When directors vote on issues affecting the corporation, ordinary matters generally require

A) a greater-than-majority vote.
B) a majority vote.
C) one vote.
D) a unanimous vote.

Question 53

Biff is a director of ChemCo Inc. Because of this position, Biff becomes involved in litigation. With respect to the costs, fees, and damages involved, he has a right to

A) access the corporation's books, records, facilities, and other property.
B) be reimbursed, or indemnified.
C) use confidential corporate information for personal advantage.
D) subordinate the corporation's welfare to his personal interest.

Question 54

Global Enterprises Inc. ' s board of directors can delegate some of its functions to

A) incorporators.
B) an executive committee.
C) corporate shareholders.
D) no one.

Question 55

Blue Sky Drones Inc. has three directors, a president, two vice presidents, a secretary, and a treasurer. Carol is a Blue Sky director. In most states, Carol

A) cannot hold a corporate office as well .
B) can hold a corporate office as well.
C) can hold a corporate office if she resigns as director.
D) can hold a corporate office if the shareholders consent.

Question 56

Opal is an officer of Peaches n' Pears Inc. The board removes Opal in violation of an employment contract. Peaches may be liable for breach of

A) contract.
B) the business judgment rule.
C) the duty of loyalty.
D) the bylaws.

Question 57

Buck is a director on the board of Construction Corporation. The board delegates work to Don, Construction's president, and other corporate officers. Buck fails to reasonably supervise the work. He is most likely liable for

A) negligence or mismanagement.
B) breach of the business judgment rule.
C) breach of the duty of loyalty.
D) violation of the articles of incorporation.

Question 58

Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate

A) her personal interests to the corporation's welfare.
B) the corporation's welfare to her personal interests.
C) her knowledge and training in the corporation's interest.
D) her business judgment in the shareholders' interests.

Question 59

A decision to outsource the production of major components for a product likely is the responsibility of the

A) board of directors.
B) high-level managers.
C) chief executive officer.
D) shareholders.

Question 60

Orin is a corporate officer for Pacific Trade Inc. In this capacity, Orin

A) authorizes major corporate policy decisions.
B) manages corporate day-to-day operations.
C) hires the other officers of the corporation.
D) determines when dividends will be paid.

Question 61

Ray is the chief corporate executive officer of Shipping Inc. For the accuracy of financial statements and reports that the firm files with the Securities and Exchange Commission, Ray is

A) logistically responsible.
B) corporately responsible.
C) personally responsible.
D) not responsible.

Question 62

Gil is an officer for HVAC Corporation. After reviewing proposals from several suppliers, Gil selects one. It turns out to be a bad choice on Gil's part, and HVAC's costs increase. Gil is most likely liable for

A) breach of trust and confidence.
B) breach of the business judgment rule.
C) negligence or mismanagement of corporate funds.
D) nothing because of the business judgment rule.

Question 63

Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. He may be protected from liability for these mistakes by

A) business success insurance.
B) the business judgment rule.
C) the duty of loyalty.
D) duty of disclosure.

Question 64

Paul is a director on the board of Quality Tire Corporation. As a director, Paul may not

A) act in accord with his own knowledge and training.
B) use prudent business judgment in the conduct of corporate affairs.
C) delegate work to corporate officers.
D) engage in self-dealing.

Question 65

AstroStar, Inc.'s board of directors consists of three members-Eckhart, Dolan, and Macero. At a regular board meeting, the board selects Galiard as president of the corporation. Later, an audit reveals that during his term as president he has openly embezzled $500,000 from AstroStar. The same audit reveals that the board knew when it selected Galiard that he had been previously convicted of embezzlement. Can the corporation hold directors Eckhart, Dolan, and Macero personally liable?

Question 66

Daisy is a director of Extraction Corporation. She opposes an offer to merge Extraction with Fill Inc. because she would lose her board position. If the merger otherwise is a good deal for the company, Daisy is most likely liable for breach of

A) the duty of care.
B) the business judgment rule.
C) the duty of loyalty.
D) the duty of notice.

Question 67

Roy is a director of Sales Service Inc. Sales enters into a contract with TeleCenter Corporation in which Roy has a personal interest. Roy must

A) apply the "don't ask, don't tell" rule of personal conduct.
B) use the situation to his personal advantage.
C) make a full disclosure of the conflict of interest.
D) eliminate the conflict by resigning from Sales Service.

Question 68

Molly is a director and Ned is an officer of Online Education Inc. Liability for the torts of employees under their supervision may extend to

A) Molly only.
B) Ned only.
C) Molly and Ned.
D) neither Molly nor Ned.

Question 69

Mitch is a director and officer of Numero Uno, Inc. Mitch makes a decision to select a new supplier that results in an increase in costs for Numero Uno and its shareholders. In addition, the Numero Uno board considers a contract to outsource all of the custodial work for the firm with One-of-a-Kind Corporation. Mitch is a director and shareholder of One-of-a-Kind. If the shareholders accuse Mitch of breaching his fiduciary duty to the corporation for the loss on the supplier contract, what is Mitch's best defense? With regard to the One-of-a-Kind contract, what is Mitch's responsibility in this situation?

Question 70

Deb is a director and Erv is an officer of Fast Food Inc. If the company violates environmental laws, liability may extend to

A) Deb only.
B) Erv only.
C) Deb and Erv.
D) neither Deb nor Erv.

Question 71

Ben is a director of Creation Corporation, an architectural firm. Without informing Creation, Ben goes into business with Design, Inc., a Creation competitor. Ben is liable for breach of

A) the duty of care.
B) the business judgment rule.
C) the duty of loyalty.
D) none of the choices.

Question 72

Elka is a director and Flynn is an officer of Groundskeeping Inc. Liability for negligence in the performance of duties may extend to

A) Elka only.
B) Flynn only.
C) Elka and Flynn.
D) neither Elka nor Flynn.