Question 1

An)_____ is a situation where one person sits on the board of directors of two different companies.

Accepted Answer

A direct interlock is when someone sits on the board of directors of two different companies. This can potentially create conflicts of interest and raise issues of favoritism.

Question 2

Differentiate a voting agreement from a voting trust.

Accepted Answer

The answer of Differentiate a voting agreement from a voting...

Question 3

What is a preemptive right?

Accepted Answer

A preemptive right is the right of existing shareholders to maintain their proportionate ownership in a company by having the right to purchase additional shares before they are offered to the general public, thus protecting themselves against dilution of their ownership percentage.

Question 4

G&C Inc.has outstanding 10,000 shares with par value of ten dollars and that Tiffany owns 5000.At the annual meeting,the shareholders decide to issue an additional 10,000 shares at par and to sell them to Sharon.Tiffany vehemently objects in order to protect dilution of her percentage of share ownership.Tiffany is exercising her _____ in this scenario.

Accepted Answer

Preemptive rights give existing shareholders the right to buy newly issued shares in proportion to their existing shares before they are offered to others. Tiffany is objecting to the sale of additional shares because she wants to protect her percentage of ownership in the company. This shows that she is exercising her preemptive rights to prevent dilution of her ownership.

Question 5

An)_____ is a situation where directors of two different companies serve jointly on the board of a third company.

Accepted Answer

An indirect interlock is a situation where directors of two different companies serve jointly on the board of a third company. This can create potential conflicts of interest and raise antitrust concerns.

Question 6

_____ is a shareholder voting method that permits the holder to distribute his or her total votes in any manner that he or she chooses-all for one candidate or several shares for different candidates.

Accepted Answer

Cumulative voting allows shareholders to distribute their votes in any manner they choose, giving them the ability to vote for multiple candidates or put all their votes towards a single candidate. This method can be particularly helpful for minority shareholders who may not have enough votes to elect their desired candidate under traditional voting methods.

Question 7

State the four main responsibilities of the director of a company.

Accepted Answer

The answer of State the four main responsibilities of the...

Question 8

_____ is a method whereby a shareholder elects a representative,commonly another individual or a written document,through which the shareholder casts his vote at the annual meeting.

Accepted Answer

The method described is called proxy voting, where a shareholder gives another individual (the proxy) or a written document (the proxy statement) the authority to cast their vote on their behalf at the annual meeting. This is commonly used when a shareholder is unable to attend the meeting in person.

Question 9

In the context of corporate powers and management,what is indemnification?

Accepted Answer

Indemnification is a method of protecting directors and officers whereby the corporation agrees to pay legal expenses incurred by the directors or officers. Essentially, it is a way of ensuring that the company will cover any costs or damages that may arise from the actions of its leaders. This can be an important tool for attracting and retaining talented executives, who may be hesitant to take on high-level roles without such protections in place.

Question 10

What is a derivative action?

Accepted Answer

A derivative action is a lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act. The shareholder must demonstrate that he or she has made a demand on the directors to take action, and the directors have wrongfully refused or failed to act.

Question 11

The _____ is a presumption given by the courts to the corporate directors that their actions were informed and done with good faith and with an honest belief that the actions were in the best interests of the corporation.

Accepted Answer

The business judgment rule provides a legal presumption that corporate directors have made decisions in good faith and with an honest belief that those decisions were in the best interests of the corporation. This presumption protects directors from legal action for their decisions, provided they made an informed decision and did not have a conflict of interest. The other choices are not related to this concept.

Question 12

Outside directors are also known as _____ directors.

Accepted Answer

Outside directors are also known as nonexecutive directors, as they are not involved in the daily operations of the company and are not part of its management team. Their role is to provide an independent perspective and oversight on the company's activities, particularly on matters related to strategy, risk management, and financial reporting.

Quiz 23: Corporate Powers and Management

An) _____ is a situation where one person sits on the board of directors of two different companies.