Deck 28: Corporate Governance and Sarbanes-Oxley Act

Question 1

Any act that can be taken at a shareholders' meeting can be taken without a meeting if all the corporate shareholders sign a written consent approving the action.

Answer 1

True

Question 2

Shareholders can bind the corporation to contracts.

Answer 2

False

Question 3

Special shareholders' meetings may be called by the board of directors,the holders of at least ten (10)percent of the voting shares of the corporation,or any other person authorized to do so by the articles of incorporation or bylaws.

Answer 3

True

Question 4

Corporate officers are responsible for the corporation's day-to-day operations.

Question 5

A corporation's shareholders own the corporation.

Question 6

Corporate directors are responsible for making policy decisions and employing officers of the corporation.

Question 7

Quarterly shareholders' meetings are held to elect directors,choose an independent auditor,and take other actions.

Question 8

Notice of a shareholders' meeting is required to be given for both annual and special meetings.

Question 9

Notice of a shareholder's meeting must be given not less than ten days or more than fifty days before the date of the meeting,and may be given in person or by mail.

Question 10

The only management duty shareholders have is the right to vote on matters such as the election of directors and the approval of fundamental changes in the corporation.

Question 11

Shareholders,directors,and officers have equal rights in managing a corporation.

Question 12

If a shareholders' annual meeting is not held within either twelve (12)months of the last annual meeting,or six (6)months after the end of the corporation's fiscal year,a shareholder may petition the court to order the meeting held.

Question 13

As a legal entity,a corporation can be held liable for the acts of its directors and officers and for authorized contracts entered into on its behalf.

Question 14

Shareholders are agents of the corporation.

Question 15

Generally,shareholders owe a fiduciary duty to other shareholders of the corporation.

Question 16

Notice of a shareholders' meeting must be given not less than five (5)days or more than thirty (30)days before the date of the meeting.

Question 17

A special shareholders' meeting can be called only by shareholders.

Question 18

Notice of a shareholders' meeting may be given in person.

Question 19

Special shareholders' meetings may be held to consider important or emergency issues,such as merger or consolidation of the corporation with one or more other corporations,the removal of directors,amendment of the articles of incorporation,or dissolution of the corporation.

Question 20

In terms of notice of a special shareholders' meeting,the purpose of the meeting need not be disclosed.

Question 21

Unless otherwise provided for in the articles of incorporation,if a majority of shares entitled to vote are represented at a shareholder's meeting in person or by proxy,there is a quorum to hold the meeting.

Question 22

If the required notice of a shareholders' meeting is not given or is defective,any action taken at the meeting is voidable.

Question 23

Shareholders must attend a shareholders' meeting to vote.

Question 24

Unless otherwise stated,a proxy is valid for eleven (11)months.

Question 25

Shareholders may vote by moxie; that is,they can appoint another person (the moxie)as their agent to vote at a shareholders' meeting.

Question 26

The cumulative method of voting means that each shareholder is entitled to multiply the number of shares he or she owns by the number of directors to be elected and cast the product for a single candidate or distribute the product among two (2)or more candidates.

Question 27

Through straight (noncumulative)voting,a majority shareholder can elect the entire board of directors.

Question 28

Unless otherwise stated in a corporation's articles of incorporation,voting for the election of directors is by the cumulative voting method.

Question 29

The Revised Model Business Corporation Act (RMBCA)permits corporations to grant more than one vote per share to some classes of stock and less than one vote per share to others.

Question 30

Once a quorum is present,the withdrawal of shares does not affect the quorum of the meeting.

Question 31

A provision in the articles of incorporation or the bylaws of a corporation requiring a greater-than-majority of shares to constitute a quorum is called a supermajority voting requirement.

Question 32

The supramajority voting requirement is often required to approve mergers,consolidation,or the sale of substantially all the assets of a corporation.

Question 33

Only those shareholders who own stock as of the record date may vote at a shareholders' meeting.

Question 34

Under straight voting,each shareholder votes the number of shares he or she owns on candidates for each of the positions open for election.

Question 35

Under the distributive method of voting for the election of directors,a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates.

Question 36

The affirmative vote of the majority of the voting shares represented at a shareholders' meeting constitutes an act of the shareholders for actions other than for the election of directors.

Question 37

Under the cumulative method of voting,a stockholder must vote all his or her votes for one candidate.

Question 38

Cumulative voting gives a minority shareholder a better opportunity to elect someone to the board of directors.

Question 39

All classes of common stock must have voting rights.

Question 40

Proxies may be in writing or posted online.

Question 41

On the board of directors of a corporation,an outside director is a director who is not also an officer of the corporation.

Question 42

The function of an audit committee is for public company employees,such as executive officers,to conduct an audit of the company.

Question 43

The "right of first refusal" is an agreement entered into by shareholders where they grant each other the right of first refusal to purchase shares they are going to sell.

Question 44

The board of directors of a corporation is appointed by the executives of the corporation.

Question 45

Voting agreements among shareholders of a corporation are usually considered to be void.

Question 46

The preemptive right of shareholders gives a shareholder the ability to prevent the dilution of his/her percentage ownership in the corporation.

Question 47

Stock dividends are a distribution of corporate assets.

Question 48

The board of directors has the authority to appoint the officers of the corporation only with shareholder approval.

Question 49

Under the Revised Model Business Corporation Act,all corporate directors' terms are fixed at one year in length.

Question 50

Dividends are paid at the discretion of the board of directors.

Question 51

An agreement among shareholders to restrict the ability to sell their shares is considered to be an unreasonable restriction on the ownership of stock,and therefore against public policy.

Question 52

A simple majority of the number of directors established in the articles of incorporation or bylaws usually constitutes a quorum.

Question 53

Corporate officers are elected by the board of directors at such time and by such manner as prescribed in the corporation's bylaws.

Question 54

The board of directors is responsible for formulating the policy decisions that affect the management,supervision,control,and operation of the corporation.

Question 55

Shareholders may enter into agreements with one another to prevent unwanted persons from becoming owners of the corporation.

Question 56

Because of the importance of most matters considered by boards of directors,they cannot use committees in conducting their business.

Question 57

A lawsuit brought on behalf of a corporation,but initiated by a shareholder because the board of directors and officers fail to bring it,is called a derivative suit.

Question 58

A corporation's board of directors has the authority to appoint the officers of the corporation.

Question 59

Actions of the board of directors are absolute,and never require shareholder approval.

Question 60

A court of equity "pierces the corporate veil" when it disregards the corporate entity and holds the shareholders of a corporation personally liable for the corporation's debts and obligations.

Question 61

If corporate directors or officers steal a corporate opportunity for themselves,this is known as usurping a corporate opportunity.

Question 62

A corporate chief executive officer can be imprisoned for up to twenty years,should he or she knowingly file and certify a false annual or quarterly report.

Question 63

The same individual may simultaneously hold more than one office in a corporation.

Question 64

Which of the following is true about the required notice for shareholders' meetings?

A) The notice can be oral or written, but is required only for special meetings.
B) The notice can be oral or written, and is required for both annual and special meetings.
C) The notice must be written, but is required only for special meetings.
D) The notice must be written, and is required for both annual and special meetings.
E) The notice must be written, but is required only when unusual items have been scheduled on the meeting agenda.

Question 65

The goals of the Sarbanes-Oxley Act are to improve corporate governance rules,eliminate conflicts of interest,and instill confidence in investors and the public that management will run public companies in the best interests of all constituents.

Question 66

The directors and officers of a corporation must act within the authority conferred upon them by the state's corporation code,the articles of incorporation,the corporate bylaws,and the resolutions adopted by the board of directors.This duty is called the duty of care.

Question 67

According to the Sarbanes-Oxley Act,if a public company is required to restate its financial statements because of material non-compliance with financial reporting requirements,the CEO and CFO must reimburse the company for any bonuses,incentive pay,or securities trading profits made because of the noncompliance.

Question 68

According to the business judgment rule,corporate directors and officers are liable to the corporation and its shareholders for even honest mistakes of judgment.

Question 69

The Sarbanes-Oxley Act prohibits public companies from making personal loans to their directors or executive officers.

Question 70

Directors and officers who intentionally act outside their authority are personally liable for any resulting damages caused to the corporation or its shareholders.

Question 71

The determination of whether a corporate director or officer has met his or her duty of care is measured as of the time the decision is made; the benefit of hindsight is not a factor.

Question 72

The two general types of shareholders' meetings are:

A) annual and special.
B) annual and quarterly.
C) general and annual.
D) general and special.
E) general and quarterly.

Question 73

Corporations are required to hold shareholders' meetings at least:

A) annually.
B) every six months.
C) twice per year, but they are not required to be held every six months.
D) quarterly.
E) monthly.

Question 74

Absent an agreement to the contrary,a corporate officer can be removed by the board of directors any time the removal is deemed to be in the corporation's best interest.

Question 75

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

Question 76

The Sarbanes-Oxley Act makes it a crime for any person to knowingly alter,destroy,mutilate,conceal,or create any document to impair,impede,influence,or obstruct any federal investigation.

Question 77

According to the Sarbanes-Oxley Act,the CEO and CFO of a public company must file a statement accompanying each annual and quarterly report certifying that the signing officer has reviewed the report,and that based on the officer's knowledge,the report does not contain any untrue statement of a material fact or omit to state a material fact that would make the statement misleading.

Question 78

The notice for which type(s)of shareholders' meetings must include the purpose of the meeting?

A) annual meetings
B) special meetings
C) annual and special meetings
D) neither annual nor special meetings
E) annual meetings, but only if special business issues are discussed

Question 79

To satisfy the fiduciary duty of care,directors and officers of a corporation must discharge their duties in good faith,with the care that an ordinary prudent person in a similar position would use under similar circumstances,and in a manner they reasonably believe to be in the best interests of the corporation.

Question 80

Corporate officers are liable on an unauthorized contract if the corporation does not ratify it.