Question 1

Thor Power Products Corporation permits its directors to be elected by cumulative voting.This

Accepted Answer

Cumulative voting allows minority shareholders to have a greater chance of being represented on the board. Instead of being limited to one vote per share, shareholders can allocate all their votes to a single candidate, which is beneficial for minority shareholders who have fewer shares but still want to have a say in the board's composition. This helps to ensure a diverse representation of views and interests on the board.

Question 2

Nina is a director of Omega,Inc.Under the standard of due care owed by di-rectors of a corporation,Nina's decisions must be

Accepted Answer

Under the standard of due care, directors are required to make informed and reasonable decisions. Therefore, the best choice is C. Choices A and D are incorrect as they imply that directors can make questionable or perfect decisions, which is not the case. Choice B is partially correct as directors' decisions must be arguable and defensible, but it does not capture the full scope of the standard of due care.

Question 3

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

Accepted Answer

Rafi, as a director, has a duty of care to attend board meetings and stay informed about the company's activities. By failing to attend meetings for three years, Rafi is not fulfilling this duty and can be held liable for any negligence or mismanagement that occurs during his absence, including Twyla's improper loans that cost the company $100,000.

Question 4

Because stock is intangible personal property,a stockholder's ownership of the stock

Accepted Answer

A stockholder's ownership of the stock exists independently of the stock certificate itself. The certificate merely serves as physical evidence of ownership, but it is not necessary for ownership to exist. The ownership is recorded in the company's books and can be transferred electronically without the need for physical transfer of the certificate.

Question 5

Louiseis a director for Icy Ices,Inc.Louise is also a director for Creamy Creams,Inc.When Icy Ices enters into a contract with Creamy Creams,Louise

Accepted Answer

Louise has a conflict of interest as a director for both companies involved in the contract. Therefore, she must disclose the conflict of interest and abstain from voting on the proposed transaction to avoid any potential legal issues for both companies. She does not necessarily have to resign from either or both boards, as long as she takes appropriate measures to ethically handle the conflict of interest.

Question 6

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

Accepted Answer

Directors have a fiduciary duty to act in the best interests of the corporation and its shareholders, and they cannot prioritize their personal interests over the corporation's welfare.

Question 7

Etta is a director of Trendy Stuff Corporation.Without informing Trendy,Etta goes into business with GR8 Things,Inc.,in competition with Trendy.Etta is li-able for breach of

Accepted Answer

Etta, as a director of Trendy Stuff Corporation, owes a duty of loyalty to the corporation. By going into business with GR8 Things, Inc. in competition with Trendy, Etta breached this duty of loyalty.

Question 8

Corporate business matters are presented at a shareholders' meeting in the form of

Accepted Answer

Resolutions are the formal proposals presented to shareholders for approval or rejection at a shareholders' meeting. Proxies are documents that authorize someone to vote on behalf of a shareholder, while articles of incorporation and bylaws are founding documents of a corporation and are not typically presented at a shareholders' meeting.

Question 9

Rosa and Sean are directors of Tech,Inc.Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is

Accepted Answer

Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is a proxy. A proxy is a written authorization from a shareholder/party that empowers another party to vote on their behalf at a meeting of shareholders. This is a common practice in corporations where some shareholders are unable to attend the meeting in person. It is important to note that while a proxy gives the authorized person the right to vote on behalf of the shareholder, it does not transfer ownership of the shares.

Question 10

RayAnn is a corporate officer for Timmy's Trees,Inc.As a corporate officer,RayAnn is

Accepted Answer

Corporate officers are typically involved in the day-to-day operations of a company, managing its business activities and implementing the board's policies.

Question 11

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

Accepted Answer

According to most state laws, corporations are required to hold an annual shareholders' meeting to elect directors and conduct other business related to the company. Therefore, Niche Stores, Inc. must hold a shareholders' meeting once a year.

Question 12

Josh is a director of Sippy Soups,Inc.Josh opposes a tender offer that is in Sippy's best interest because its acceptance would cost him his position as a director.Josh is liable for a breach of duty of

Accepted Answer

Josh is opposing a tender offer that is in the best interest of the company solely for his own personal gain, which is to keep his position as a director. This goes against the duty of loyalty towards the company and its shareholders. As a director, Josh has a responsibility to act in the best interest of the company, and he should not prioritize his personal interests over those of the company. Therefore, Josh is liable for breaching the duty of loyalty.

Question 13

Fiona owns one share of stock in SK8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

Accepted Answer

Fiona's ownership of the stock is not forfeited immediately or within ten days of a third party's claim to ownership. However, she may need to take steps to obtain a new certificate or provide proof of ownership within thirty days if she cannot find the original certificate.

Question 14

Great Gates,Inc.has a board of ten directors.Great Gates' bylaws do not state any quorum requirements.In most states,a quorum for Great Gates will be defined as

Accepted Answer

In most states, a quorum for a board of directors is typically a majority of the total number of directors. Since Great Gates, Inc. has ten directors, a majority would be six directors.

Question 15

Dave is an officer for Sweet Somethings Candies,Inc.In 2012,chocolate hearts were very popular.Acting within his managerial authority and the powers of the corporation,Dave signs a contract for an increase in chocolate heart production for 2013.In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money.Dave is most likely

Accepted Answer

Dave acted within his managerial authority and the powers of the corporation. The failure of the chocolate hearts cannot be attributed to Dave's actions alone as market conditions can change unpredictably, and product performance cannot be guaranteed. Therefore, Dave is not liable for breach of duty of care, breach of duty of loyalty, or violation of the business judgment rule.

Question 16

Odell is a director of Price Rite,Inc.As a director,with respect to the corporation,Odell is

Accepted Answer

Directors of a corporation owe fiduciary duties to the company, such as the duty of loyalty and the duty of care. Therefore, option A is the correct answer. Option B, forum, refers to a place or medium used for discussion or exchange of ideas, which is not relevant in this context. Option C, proxy, refers to a person appointed to vote on behalf of another, which again is not relevant here. Option D, quorum, refers to the minimum number of members required to conduct a meeting, which is also not relevant to the question.

Question 17

Coast-to-Coast Distribution,Inc.,is a direct-mail distribution company.Like most corporations,Coast-to-Coast's employees include its

Accepted Answer

Officers are typically employees in charge of managing the day-to-day operations of a corporation, such as Coast-to-Coast Distribution, Inc. The board of directors is a group of individuals elected by the shareholders to oversee the management of the corporation, and incorporators are individuals who filed the paperwork to legally create the corporation. Shareholders are individuals or entities that own stock in the corporation.

Question 18

Jaycee is a shareholder for Designer Pet Clothes,Inc.Designer Pet Clothes uses cumulative voting to elect directors.This means that the number of Jaycee's votes is determined by

Accepted Answer

Cumulative voting allows shareholders to cast all their votes for one candidate or distribute them among several candidates. The number of votes a shareholder has is determined by the number of voting shares they hold multiplied by the number of board members to be elected. Therefore, Option B is the correct answer. Options A, C, and D are not relevant to determining the number of Jaycee's votes in a cumulative voting system.

Question 19

Frawsty Corporation distributes beverages in the greater Northwest.Frawsty's board of directors can delegate some of its functions to

Accepted Answer

The board of directors has the authority to delegate some of its functions to the officers of the corporation. This is a common practice in corporations to ensure efficient operation and delegation of responsibilities. The incorporators and shareholders do not have the authority to carry out functions delegated by the board of directors.

Question 20

Mickey is a director of Fine Art Dealers,Inc.Mickey is trained in art valuation.Fine Art Dealers makes several purchases in which it pays too much money for artwork.Mickey approves all the transactions without reading the details.Mickey is most likely

Accepted Answer

Mickey, as a director trained in art valuation, has a duty of care to exercise reasonable care and diligence while making business decisions for the company. By approving transactions without reading the details and allowing the company to pay too much money for artwork, Mickey breaches this duty of care and can be held liable for any resulting losses or damages.

Quiz 25: Corporate Directors, officers, and Shareholders