Deck 16: Corporations and Corporate Governance

Question 1

The articles of incorporation are also known as the ________.

A) bylaws
B) corporate charter
C) registration statement
D) petition for incorporation

Answer 1

corporate charter

Question 2

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. Suppose that two directors of the corporation are to be elected from a potential pool of five candidates. Ester favors candidates 1 and 5, Mendez favors candidates 2 and 4, Judy favors candidates 3 and 4, and Aaron favors candidates 2 and 3. If straight voting occurs, which of the two candidates are likely to win?

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

Answer 2

candidates 1 and 5

Question 3

Briefly describe the manner in which a board of directors conducts business.

Answer 3

A board of directors usually conducts its business at regular or special meetings of the board. Regular meetings of a board of directors are held at the times and places established in the bylaws. A board can call special meetings of the board of directors as provided in the bylaws. Special meetings are usually convened for reasons such as issuing new shares, considering proposals to merge with other corporations, adopting maneuvers to defend against hostile takeover attempts, and the like. The board of directors may act without a meeting if all the directors sign written consents that set forth the actions taken. A simple majority of the number of directors established in the articles of incorporation or bylaws usually constitute a quorum of the board of directors for transacting business. However, the articles of incorporation and the bylaws may increase this number. If a quorum is present, the approval or disapproval of a majority of the quorum binds the entire board. The articles of incorporation or the bylaws can require a greater than majority of directors to constitute a quorum of the vote of the board. The board of directors authorizes actions to be taken on behalf of the corporation by adopting resolutions. The resolution is put forward by a member of the board, usually seconded by another board member, and then put to the vote of the entire board of directors. Corporate resolutions are recorded in the written minutes of the board of directors' meetings and specify the action taken by the board of directors. Resolutions can be adopted for many subjects that affect the corporation.

Question 4

Helen is the vice-president of Gotspeed Corporation, a company that designs, manufactures and sells sports shoes. Nestor, an independent entrepreneur, designs a new shoe that helps the user's foot grip the shoe better, and he calls it the Anklator. Nestor's friend schedules an appointment for him to meet Helen and present the Anklator for possible adoption by Gotspeed. Instead of presenting the opportunity to Gotspeed's board of directors, Helen pays Nestor's asking price and purchases the Anklator design for herself. She then quits and forms her own company to manufacture and sell Anklator shoes. Helen has breached her duty of loyalty to Gotspeed Corporation by ________.

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

Question 5

Jameson works for Fishy-Mart Corporation, a chain of superstores that sells large quantities of seafood. His job is to locate future sites for Fishy-Mart stores. Jameson finds a piece of real estate near a coastline that would make a great site for a Fishy-Mart store. He asks his friend to purchase the property from its current owner and has a secret agreement with his friend to split the profits when he sells the property to Fishy-Mart. Jameson, without disclosing his interest in the property, recommends the site to Fishy-Mart, which then purchases the property from Jameson's friend. The friend splits the profits with Jameson. What breach of the duty of loyalty has Jameson committed?

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

Question 6

An unwanted corporate takeover can be conducted by means of a ________.

A) merger
B) tender offer
C) share exchange
D) sale of assets

Question 7

Describe the mechanics of a tender offer.

Question 8

Many multinational corporations conduct business in another country by using a(n) ________.

A) shell company
B) international subsidiary corporation
C) alter ego corporation
D) special purpose entity

Question 9

What is a multinational corporation? What is an international subsidiary corporation? How are these two concepts related?