Deck 40: A: Corporate Directors,officers, Shareholders

Question 1

Shareholders must attend a shareholders' meeting to vote their shares.

Answer 1

False

Question 2

Shareholders must approve fundamental changes affecting the corporation before the changes can be implemented.

Answer 2

True

Question 3

The board of directors normally can remove a corporate officer at any time with or without cause.

Answer 3

True

Question 4

Corporate directors are rarely compensated for their work,effort,and especially the risk involved.

Question 5

A shareholder's right to inspect corporate books and records is unlimited.

Question 6

In certain instances of fraud,a court may "pierce the corporate veil" to hold the shareholders individually liable.

Question 7

A director does not need to disclose any conflict of interest before voting on a proposed transaction.

Question 8

In most states,one individual cannot be both an officer and a director.

Question 9

Directors are entitled to use confidential corporate information for their personal advantage.

Question 10

Committees of the board of directors increase the efficiency of the board.

Question 11

An outside director is a director who is also an officer of the corporation.

Question 12

In most states,a director cannot be removed without cause unless shareholders have reserved the right.

Question 13

Each director has a right of access to the corporation's books and records,facilities,and premises.

Question 14

A director or officer is not liable to the corporation for a bad business decision.

Question 15

Dividends can be paid in cash.

Question 16

Before shareholders can bring a derivative suit,they must submit a written demand to the corporation,asking the board of directors to take action.

Question 17

If a stock certificate is lost or destroyed,ownership is not destroyed with it.

Question 18

For shareholders to act during a meeting,a quorum must be present.

Question 19

Many states permit a corporate board to have fewer than three directors.

Question 20

Directors and officers must subordinate the welfare of the corporation to their personal interests.

Question 21

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

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

Question 22

Genna is a director of Fab Stuff Corporation.Without informing Fab,Genna starts up Evertrendy,Inc. ,to compete with Fab.Genna is li?able for breach of

A)no duty or rule
B)the business judgment rule.
C)the duty of loyalty.
D)the right of participation.

Question 23

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

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

Question 24

Naomi and Ogden are shareholders of MediCare Residences,Inc.As shareholders,they must approve

A)conducting a merger.
B)deciding to pursue new business opportunities.
C)terminating a managerial employee.
D)negotiating a contract between management and labor.

Question 25

Whit is a director of Vids Corporation.With respect to policymaking decisions necessary to the management of corporate affairs,Whit and the other Vids directors have responsibility for

A)all of the decisions.
B)only the decisions referred to them by the shareholders.
C)only the decisions referred to them by the officers.
D)none of the decisions.

Question 26

Orin is a shareholder of Pinkwater Corporation.In some states,Orin might in?cur personal liability for Pinkwater obligations if he

A)accepts a dividend knowing that it was paid from retained earn?ings.
B)buys stock for less than its fair-market value.
C)fails to fulfill his fiduciary duty to the majority shareholders.
D)sells his shares.

Question 27

Viola is a director of Water Pure Corporation.With respect to Water Pure,Viola's most important right is the right of

A)compensation.
B)indemnification.
C)participation.
D)certification.

Question 28

Ogilvie,a director of Pitstop Service Station Corporation,does not attend a board meet?ing for three years.During that time,Noreen,Pitstop's president,makes improper loans that cost the company $100,000.Ogilvie is most likely

A)liable for negligence or mismanagement.
B)liable for violation of the business judgment rule.
C)not liable because missing meetings is an honest mistake.
D)not liable because missing meetings is only poor judgment.

Question 29

Darla is a shareholder of Candy Confection Corporation.The right to inspect corporate books and records is

A)held by Darla only if she is a director.
B)held by Darla,without restrictions.
C)held by Darla,with some restrictions.
D)not held by Darla.

Question 30

Rocco is a director of Spa Lids & Tubs,Inc.Under the standard of due care owed by di?rectors of a corporation,Rocco's decisions must be

A)unwavering and unquestionable.
B)arguable and defensible.
C)informed and reasonable.
D)perfect and unassailable.

Question 31

Cara and Dru are officers of EZ Trucking Corporation.As cor?porate officers,the rights of Cara and Dru are

A)determined by their employment contracts.
B)specified in state corporation statutes.
C)the same as those of the directors.
D)the same as those of the shareholders.

Question 32

Zero Sum Games Corporation has forty-three shareholders.The minimum number that must be present at a meeting for a shareholders' vote is

A)all of the shareholders.
B)a quorum.
C)a proxy.
D)three of the shareholders.

Question 33

Sylvia is an officer of Triad Hotel Company.As an officer,with respect to the corporation,Sylvia is

A)a fiduciary.
B)a forum.
C)a proxy.
D)a quorum.

Question 34

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

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

Question 35

Flite-Craft Corporation makes and sells aircraft parts.In most states,the minimum number of directors that must be present before Flite-Craft's board could transact its business is

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.
D)one.

Question 36

Raul is chairman of the board of Swif-Vac Corporation.Pinky,a con?sumer,is injured while using a Swif-Vac product.Pinky sues Swif-Vac,and Raul individu?ally.Swif-Vac may pay Raul's legal fees under

A)the director's right to certification.
B)the director's right to compensation.
C)the director's right to indemnification.
D)no circumstances.

Question 37

Niche Stores,Inc. ,must hold a shareholders' meeting

A)monthly.
B)annually.
C)biannually.
D)only when it is called by the board of directors.

Question 38

Odell,Prince,and Quinn are shareholders of Rite Corporation.Before a shareholders' meeting,they agree in writing to vote their shares together in a certain manner.Usually,such agreements are held to be

A)invalid and unenforceable.
B)oppressive and irresponsible.
C)suspect and voidable.
D)valid and enforceable.

Question 39

Roth and Starr are shareholders of Triumph Hotel Corporation.Triumph's directors fail to declare a dividend.Roth and Starr could succeed in asking a court to order the directors to meet and declare a dividend

A)if Triumph has sufficient earnings available to pay a dividend.
B)if Triumph has cash reserves earmarked for a different purpose.
C)if withholding a dividend is an abuse of the directors' discretion.
D)under no circumstances.

Question 40

Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Corporation.As directors,they may not

A)authorize major corporate policy decisions.
B)decide to issue stock and bonds,and declare dividends.
C)select and remove corporate officers.
D)support businesses that directly compete with Gallery.

Question 41

Guy is Hot Java Company's majority shareholder.Guy decides to sell his Hot Java stock.The sale will be an effective transfer of the control of the company.Does Guy owe a duty to Hot Java or its minority shareholders in this situation?

Question 42

Mitch is a director and officer of Numero Uno,Inc.Mitch makes a market?ing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders.The shareholders accuse Mitch of breaching his fiduci?ary duty to the corporation.What is Mitch's best defense against this ac?cu?sation? Later,a resolution comes before the Numero Uno board to compete with One-of-a-Kind Corporation.Mitch is a director and shareholder of One-of-a-Kind.What is Mitch's responsibility in this situation?