Deck 37: Corporate Governance and the Sarbanes-Oxley Act

Question 1

A ________ is a date specified in corporate bylaws that determines whether a shareholder may vote at a shareholders' meeting.

A)ballot date
B)reinvestment date
C)record date
D)dividend date

Answer 1

C

Question 2

Merrick and Stanley Corporation has 28,000 outstanding shares.During a proposal for a merger,the shareholders decide to increase the quorum of the vote of shareholders to 75 percent using the supramajority voting rule.How many minimum affirmative votes are needed to pass the supramajority voting requirement?

A)14,001
B)21,280
C)21,000
D)28,000

Answer 2

C

Question 3

Which of the following is true of a shareholder voting agreement?

A)It is an agreement between the board of directors and a shareholder.
B)It has a limited duration of 10 months.
C)It does not have to be filed with the corporation.
D)It is always revocable.

Answer 3

C

Question 4

________ is a system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open.

A)Cumulative voting
B)Straight voting
C)Supramajority voting
D)Trust voting

Question 5

Inkilwas Corporation has 30,000 outstanding shares.A shareholders' meeting is duly called to amend the articles of incorporation,and 17,501 shares are represented at the meeting.If an Inkilwas Corporation amendment for its articles of incorporation is put to vote at this meeting,which of the following statements is true with respect to the passing of the amendment?

A)The amendment would not be passed as all 30,000 votes have to be represented.
B)The amendment would be passed only if all 17,501 votes approve.
C)The amendment would be passed if 4,376 votes approve.
D)The amendment would be passed if 8,751 votes approve.

Question 6

A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called ________.

A)straight voting
B)an accommodation
C)voting by proxy
D)an insider director

Question 7

An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares is known as ________.

A)supramajority voting
B)voting trust
C)cumulative voting
D)noncumulative voting

Question 8

Inkilwas Corporation has 30,000 outstanding shares.A shareholders' meeting is duly called to amend the articles of incorporation,and 17,501 shares are represented at the meeting.According to the Revised Model Business Corporations Act (RMBCA),what is the minimum number of outstanding shares that must be represented in this case to have a quorum?

A)12,001
B)18,501
C)15,001
D)17,501

Question 9

A ________ is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else.

A)shareholder voting agreement
B)preemptive sale
C)buy-and-sell agreement
D)right of first refusal

Question 10

The written document submitted by a person who has been authorized by a shareholder to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is known as the ________.

A)record date
B)notice of the shareholder's meeting
C)certificate of authority
D)proxy

Question 11

When is the annual shareholder's meeting held?

A)on the dates fixed in the bylaws
B)at the whim of the board of directors
C)only if and when there is a crisis
D)only at the time of electing a new board of members

Question 12

Bilkis Brans has 20,000 outstanding shares with four shareholders.Ester owns 9,000 shares,Mendez owns 4,000 shares,Judy owns 4,000 shares,and Aaron owns 3,000 shares.Assume that two directors of the corporation are to be elected from a potential pool of five candidates.Ester is in favor of Candidates 1 and 5,Mendez is in favor of Candidates 2 and 4,Judy is in favor of Candidates 4 and 3,and Aaron is in favor of Candidates 2 and 3.If the voting is done by straight voting,which two candidates are likely to win?

A)Candidate 1 and Candidate 5
B)Candidate 1 and Candidate 4
C)Candidate 2 and Candidate 3
D)Candidate 2 and Candidate 4

Question 13

Kinderfelt Corporation has 15,000 outstanding shares of which Gordon owns 2,000.Kinderfelt plans to raise more capital by issuing another 10,000 shares of stock.With preemptive rights,how many of the new shares does Gordon have the right to buy before they are sold to the public?

A)10,000
B)3,000
C)5,000
D)2,000

Question 14

A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as ________.

A)trust voting
B)noncumulative voting
C)cumulative voting
D)supramajority voting

Question 15

Which of the following is true of shareholders?

A)They cannot enter into contracts that bind the corporation.
B)They cannot vote to elect the board of directors.
C)They cannot take active charge in deciding fundamental changes in the corporation.
D)They are considered agents of the corporation.

Question 16

Derrick has 2,000 shares of Unistone Corporation,which is planning to vote for two new directors.Through a special voting provision in the corporation's articles of incorporation,Derrick was able to vote for both his preferred candidates with 2,000 shares,which gave him a virtual voting count of 4,000 shares.What voting rule in the articles of incorporation allows Derrick to achieve this?

A)supramajority voting
B)noncumulative voting
C)cumulative voting
D)preemptive voting

Question 17

________ is a requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders.

A)Supramajority voting
B)Shareholder majority voting
C)Quorum share voting
D)Cumulative voting

Question 18

An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement is referred to as a ________.

A)preemptive sale
B)right of first refusal
C)buy-and-sell agreement
D)shareholder voting agreement

Question 19

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

A)corporate officers
B)shareholders
C)registered agents
D)managing directors

Question 20

According to the Revised Model Business Corporations Act (RMBCA),what establishes a quorum to hold a meeting of the shareholders?

A)a majority of outstanding shares
B)a majority of unissued shares
C)a majority of treasury shares
D)a majority of liquidated shares

Question 21

Shareholders do not have to attend a shareholders' meeting to vote.

Question 22

Shareholders elect a panel of decision makers known as the ________.

A)registered agents
B)corporate officers
C)stakeholders
D)board of directors

Question 23

A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation itself fails to bring the lawsuit is known as a ________.

A)notice of the shareholder
B)derivative action
C)class action suit
D)contract action

Question 24

The record date for the declaration of dividends is set forth in the articles of incorporation.

Question 25

A member of the board of directors who is also an officer of the corporation is known as a(n)________.

A)inside director
B)ombudsman
C)registered agent
D)shareholder

Question 26

Which of the following are considered owners of a corporation?

A)shareholders
B)board of directors
C)chief executive officer
D)corporate officers

Question 27

________ are employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation.

A)Corporate officers
B)Shareholders
C)Registered agents
D)Ombudsmen

Question 28

________ are rights that give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

A)Rights to first refusal
B)Preemptive rights
C)transfer rights
D)Rights to company ownership

Question 29

A(n)________ is a member of a board of directors who is not an officer of the corporation.

A)corporate officer
B)chief executive officer
C)ombudsman
D)outside director

Question 30

Samson owns 1,500 shares out of the 10,000 outstanding shares of Comakote Corporation.If Comakote declares a stock dividend of 30 percent,what will be the total stock Samson has upon receiving his stock dividend?

A)2,250
B)4,500
C)1,950
D)5,400

Question 31

Which of the following is true of the board of directors of a corporation?

A)The directors of the board can act individually on the corporation's behalf.
B)Each director has the power of two votes.
C)Directors cannot vote by proxy.
D)Meetings of the board of directors cannot be held without shareholder representation.

Question 32

An annual shareholders' meeting is held to elect new shareholders.

Question 33

Which of the following is true about dividends?

A)Dividends are paid at the discretion of the shareholders.
B)Dividends cannot be used for corporate purposes.
C)Dividends are paid to shareholders who have sold their shares prior to the record date.
D)Dividends once declared, cannot be revoked.

Question 34

One of the powers of a shareholder is his or her right to elect the board of directors.

Question 35

In which of the following cases can the alter ego doctrine be invoked?

A)when shareholders bring a lawsuit on behalf of the corporation after the corporation failed to do it itself
B)when unpaid creditors are trying to collect from shareholders who owe a debt to the corporation
C)when there is a mismanagement of stocks by the board of directors
D)when shareholders are trying to collect for fraud committed by a third party

Question 36

Which of the following is true of stock dividends?

A)They are the redistribution of corporate assets as shares.
B)They increase an existing shareholder's proportionate ownership interest.
C)They are additional stocks distributed as dividends.
D)They are distributed according to the existing ownership interest of the board of directors.

Question 37

Which of the following is considered an absolute power of corporate directors?

A)the adoption of resolutions
B)the approval of transactions
C)the inspection of the corporation's books and records
D)the declaration of share stocks

Question 38

________ is a doctrine that says if a shareholder dominates a corporation and uses it for improper purposes,a court can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations.

A)Piercing the corporate veil
B)Fruit of the poisonous tree
C)Right of first refusal
D)Self-dealing

Question 39

Shareholders of a corporation act as agents of the corporation.

Question 40

A system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open is known as cumulative voting.

Question 41

The election of directors of the corporation can be held by electronic method.

Question 42

According to the right of first refusal,a selling shareholder must offer to sell his or her shares to the other parties to the agreement before selling them to anyone else.

Question 43

If a shareholder does not exercise his or her preemptive rights within the stated time,shares can then be sold to anyone.

Question 44

Persons who are shareholders on the record date are entitled to receive the dividend,even if they sell their shares before the payment date.

Question 45

The board of director's right to inspection can be limited by bylaws.

Question 46

Shareholders are responsible for determining how much will be paid in dividends.

Question 47

The president of a corporation is an example of a corporate officer.

Question 48

Public companies are exempt from the requirement of corporations to have audit committees.

Question 49

Proxy solicitation for shareholder votes cannot be made by electronic transmission.

Question 50

A derivative lawsuit is brought by the board of directors on behalf of the corporation.

Question 51

Shareholder voting agreements have to be filed with the corporation.

Question 52

Once the number of board of directors is fixed by the articles of incorporation,the number cannot be amended.

Question 53

Once declared,a cash or property dividend cannot be revoked.

Question 54

In a voting trust,the legal titles to the shares given to the trustee are held in the name of the shareholders.

Question 55

Which of the following policies prevents a corporate officer from being sued for honest mistakes made on behalf of a corporation?

A)duty of loyalty
B)duty of obedience
C)business judgment rule
D)self-dealing

Question 56

Explain the term of office for members of a corporate board of directors.

Question 57

A buy-and-sell agreement allows shareholders to sell their shares to people other than fellow shareholders or the corporation.

Question 58

What is the supramajority voting requirement for shareholders?

Question 59

A corporation cannot ratify an unauthorized act committed by its corporate officer.

Question 60

Dividends are a distribution of corporate profits to shareholders.

Question 61

A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders is known as ________.

A)duty of care
B)duty of loyalty
C)duty of obedience
D)self-dealing

Question 62

A director's failure to properly supervise a subordinate who causes a loss to the corporation would be considered a breach of the duty of care.

Question 63

A director who personally competes with the corporation he or she is employed in is said to have breached the duty of obedience.

Question 64

To prove usurping by a director or an officer,a corporation must have the financial ability to take advantage of the usurped opportunity.

Question 65

The determination of whether a corporate director or officer has met his or her duty of care is measured in hindsight.

Question 66

Which of the following would be seen as a breach of the duty of loyalty by a corporate officer?

A)straight voting
B)cumulative voting
C)piercing the corporate veil
D)self-dealing

Question 67

Jameson works for Fishy-Mart Corporation,a chain of superstores that sell large quantities of seafood.His job is to locate future sites for Fishy-Mart stores.Jameson finds a piece of land near a coastline that would make a great site for a Fishy-Mart store.Jameson makes his friend purchase the property from its current owner.After that,they sell the property to Fishy-Mart and share the profits.Jameson does not disclose his interest in the property while recommending the site to Fishy-Mart.Which of the following duties of loyalty has Jameson breached in this scenario?

A)usurping a corporate opportunity
B)self-dealing
C)competing with the corporation
D)proxy

Question 68

What is self-dealing?

Question 69

Helen works as the vice president of Gotspeed Corporation,a company that manufactures and markets sports shoes.Nestor,a private cobbler,designs a new model of shoes that help a user's feet grip the shoe better,and he calls it the Anklator.Nestor's friend fixes an appointment for him with Helen to present his shoe model for possible adoption by Gotspeed.Instead of bringing the opportunity to Gotspeed's board of directors and the corporation,Helen pays Nestor's asking price and purchases the Anklator model herself.Helen leaves Gotspeed Corporation and forms her own company that manufactures and markets the Anklator shoe models.Which of the following is the the duty of loyalty breached by Helen?

A)self-dealing
B)usurping a corporate opportunity
C)making a secret profit
D)competing with the corporation

Question 70

A director or corporate officer who usurps a corporate opportunity would be in violation of the director's fiduciary duty called ________.

A)duty of obedience
B)duty of loyalty
C)duty of care
D)self-dealing

Question 71

Marshall is the purchasing agent for DigitoolArt Corporation.His job requires him to negotiate and execute contracts for purchasing office supplies and equipment for the corporation.Assume that Bronson,a computer salesperson,pays Marshall a $20,000 kickback to purchase from him computers needed by DigitoolArt Corporation.Which of the following duties of loyalty has Marshall breached in this scenario?

A)competing with the corporation
B)making a secret profit
C)self-dealing
D)usurping a corporate opportunity

Question 72

The duty of loyalty requires directors and officers to subordinate their personal interests to those of the corporation and its shareholders.

Question 73

The business judgment rule protects shareholders for honest mistakes of judgment.

Question 74

Self-dealing is when shareholders use their position to deprive the board of directors of personal monetary gain.

Question 75

A director or corporate officer who does not attend board meetings regularly would be in violation of ________.

A)self-dealing
B)duty of care
C)duty of loyalty
D)duty of obedience

Question 76

Usurping a corporate opportunity is a breach that can only be committed by a shareholder.

Question 77

The corporation can recover any profits made by unapproved competition by a director.

Question 78

If a fraud is committed by a member of the board of directors of a corporation,a written notice to the corporation from individual shareholders is not required to bring a derivative lawsuit.

Question 79

Give an account of the directors' and corporate officers' duty of care toward the corporation.

Question 80

The secret profits obtained by a director or officer cannot be recovered by a corporation.