Question 1

Which of the following are among the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in relation to shareholder control of pay for top executives?

Accepted Answer

The Dodd-Frank Wall Street Reform and Consumer Protection Act provides for shareholder control of pay for top executives through an advisory vote on company payment practices for top executives and a shareholder advisory vote on golden parachutes for executives. However, it only applies to public companies, not privately held ones. Option A and C wrongly state that shareholders of all companies can set executive compensation, including privately held ones. Option D is incorrect as it is the opposite of what the act provides for.

Question 2

Which of the following is true regarding state rules of corporate governance?

Accepted Answer

California has specific rules that apply to quasi-foreign corporations, which are companies incorporated in another state but have significant business operations in California.

Question 3

Which of the following was the result on appeal in the case in the text Omnicare,Inc.v.NCS Healthcare,Inc.,involving whether directors of an insolvent publicly traded company violated their fiduciary duty when they entered into an agreement for the sale of the company to a particular interested buyer regardless of other offers?

Accepted Answer

The result on appeal in the case was that the directors violated their fiduciary duty and lacked the authority to agree to an absolute lock-up guaranteeing the sale and agreeing to forego consideration of future offers. This was because the directors did not conduct an adequate market check and did not consider other potential buyers, which resulted in the sale being at a lower price than it could have been. Therefore, the agreement was not in the best interest of the company and its shareholders, and the directors breached their duty of loyalty and care.

Question 4

A[n] _______ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during a period known as the ______ period which is not usually for more than _______.

Accepted Answer

The question is describing the characteristics of an option, not a call right or redemption. An option gives the holder the right to buy or sell shares at a fixed price (strike price) for a fixed period of time (expiration period). Therefore, choice D is the correct answer as it mentions "option" and "exercise period" which is usually for up to 10 years.

Question 5

Which of the following was the result in the case in the text involving a no-hand pill under Delaware law?

Accepted Answer

The pill was invalid because it restricted the board's statutory power to manage the company's affairs and the directors' ability to fulfill their fiduciary duties by not allowing redemption for six months.

Question 6

What is required by the Sarbanes-Oxley Act of 2002 in regard to the certification of the accuracy of public companies' SEC filings and the adequacy of internal controls?

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires the chief executive officer and the chief financial officer of public companies to certify the accuracy of SEC filings and the adequacy of internal controls. The act does not require inside directors or outside directors to provide certification. Therefore, options A, B, and D are incorrect.

Question 7

A shareholder derivative suit is a lawsuit by

Accepted Answer

A shareholder derivative suit is a lawsuit filed by one or more shareholders on behalf of the corporation against a third party for harm caused to the corporation. The lawsuit seeks to recover damages or other relief for the benefit of the corporation, not the individual shareholders.

Question 8

What was the result in Smith v.Van Gorkom,the case in the text in which it was alleged that directors were grossly negligent in failing to inform themselves adequately before making a decision about a merger?

Accepted Answer

The result in Smith v. Van Gorkom was that the board failed to obtain adequate information on the merger terms and therefore, would not be protected by the business judgment rule. The court held that the directors were grossly negligent in their decision-making process and did not adequately inform themselves before making the decision about the merger. This case established the duty of care standard for directors, which requires them to make informed and well-considered decisions.

Question 9

In the context of executive compensation,______ stock usually means stock subject to vesting restrictions.

Accepted Answer

Restricted stock refers to stock that is subject to vesting restrictions, meaning the recipient cannot outright own or sell the stock until a certain period of time has passed or certain conditions have been met. This is a common form of executive compensation. "Regulated" does not accurately describe this type of stock, and "illegally issued" and "kickback" are not relevant to the definition of restricted stock.

Question 10

The ________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Accepted Answer

The corporate opportunity doctrine requires that officers and directors of a corporation not take personal advantage of business opportunities that rightfully belong to the corporation. This doctrine is designed to prevent conflicts of interest, and ensures that officers and directors act in the best interests of the corporation rather than their own personal gain. The other options (A, C, and D) are not directly related to this concept.

Question 11

Which of the following is true regarding any duties of controlling shareholders in relation to control of a corporation?

Accepted Answer

The answer of Which of the following is true regarding...

Question 12

Which of the following is not a prime consideration in determining whether a fiduciary has taken an opportunity that belongs to a corporation?

Accepted Answer

While the amount of money the fiduciary stands to make may be a relevant factor, it is not the prime consideration in determining whether a fiduciary has taken an opportunity that belongs to a corporation. The prime considerations include factors such as whether the opportunity is in the corporation's line of business, whether the fiduciary developed the idea using corporation resources, and whether the involvement by the fiduciary will hinder the corporation's purposes.

Question 13

Which of the following was the result on appeal in In re Abbott Laboratories Derivative Shareholders Litigation,the case in the text alleging corporate directors' breach of the duty of good faith through their failure to follow up on repeated notices of regulatory noncompliance?

Accepted Answer

The result on appeal in In re Abbott Laboratories Derivative Shareholders Litigation was that the plaintiffs sufficiently pleaded allegations that, if true, constituted a breach of the duty of good faith leading to the directors' actions falling outside the protection of the business judgment rule. In other words, the case was sent back to the lower court for further proceedings. Therefore, choice D is the correct answer.

Question 14

Some jurisdictions permit the shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty of

Accepted Answer

Some jurisdictions allow shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty of care. However, such provisions typically cannot relieve directors of liability for intentional misconduct, fraudulent actions, or other breaches of duty. Shareholders usually cannot relieve directors of liability for breaches of the duty of loyalty, avoiding self-dealing, or voting.

Question 15

Which of the following is true in regard to the business judgment rule if one or more individual directors have a personal interest in a transaction being considered by the board?

Accepted Answer

If one or more individual directors have a personal interest in a transaction being considered by the board, the decision may be entitled to the protection of the business judgment rule if it is approved by a majority of the disinterested directors. This means that the decision-making process should be free from any personal interest or bias and should involve a majority of directors who are not personally interested in the transaction.

Question 16

Which of the following was the result on appeal in the case in the text Air Products & Chemicals,Inc.v.Airgas,Inc.,involving whether the defendant's board of directors breached its fiduciary duties to stockholders by refusing to redeem a poison pill in place and allow a hostile takeover to proceed?

Accepted Answer

The result on appeal in the case Air Products & Chemicals, Inc. v. Airgas, Inc. was that the board satisfied its fiduciary duties because the members acted reasonably in response to the belief, based on reasonable grounds, that the hostile takeover offer was inadequate and posed a legitimate threat if accepted. The court upheld the board's decision to block the hostile takeover by keeping the poison pill in place. Therefore, option B is the correct answer.

Question 17

Which of the following is considered an inside director of a corporation?

Accepted Answer

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

Question 18

Which of the following is true regarding hostile takeovers in the European Union?

Accepted Answer

Member states may opt out of the neutrality rule and the breakthrough rule.

Question 19

Which of the following is true regarding statements of officers?

Accepted Answer

The answer of Which of the following is true regarding...

Question 20

Which of the following was the result in the case in the text from the Delaware Court of Chancery involving a dead-hand pill under Delaware law?

Accepted Answer

The result in the case was that the dead-hand pill violated the state general corporation law for a number of reasons, including that it violated the directors' duty of loyalty. Option A is incorrect because the court held that the pill violated the law. Option B is incorrect because directors are not entitled to use any means necessary to block a hostile takeover if it violates their legal duties. Option D is incorrect because the pill prejudiced directors in place prior to the takeover, but this was not the only reason that the court found the pill to be illegal.

Quiz 20: Directors, Officers, and Controlling Shareholders

Which of the following are among the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in relation to shareholder control of pay for top executives?

Which of the following is true regarding state rules of corporate governance?

A[n] _ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during a period known as the period which is not usually for more than ___.

Which of the following was the result in the case in the text involving a no-hand pill under Delaware law?

What is required by the Sarbanes-Oxley Act of 2002 in regard to the certification of the accuracy of public companies' SEC filings and the adequacy of internal controls?

A shareholder derivative suit is a lawsuit by

What was the result in Smith v.Van Gorkom,the case in the text in which it was alleged that directors were grossly negligent in failing to inform themselves adequately before making a decision about a merger?

In the context of executive compensation,______ stock usually means stock subject to vesting restrictions.

The ________ requires that officers and directors not take personal advantage of a desirable business investment that rightfully belongs to the corporation.

Which of the following is true regarding any duties of controlling shareholders in relation to control of a corporation?

Which of the following is not a prime consideration in determining whether a fiduciary has taken an opportunity that belongs to a corporation?

Which of the following was the result on appeal in In re Abbott Laboratories Derivative Shareholders Litigation,the case in the text alleging corporate directors' breach of the duty of good faith through their failure to follow up on repeated notices of regulatory noncompliance?

Some jurisdictions permit the shareholders to amend the articles of incorporation to relieve directors of any financial liability for violations of the duty of

Which of the following is true in regard to the business judgment rule if one or more individual directors have a personal interest in a transaction being considered by the board?

Which of the following was the result on appeal in the case in the text Air Products & Chemicals,Inc.v.Airgas,Inc.,involving whether the defendant's board of directors breached its fiduciary duties to stockholders by refusing to redeem a poison pill in place and allow a hostile takeover to proceed?

Which of the following is considered an inside director of a corporation?

Which of the following is true regarding hostile takeovers in the European Union?

Which of the following is true regarding statements of officers?

Which of the following was the result in the case in the text from the Delaware Court of Chancery involving a dead-hand pill under Delaware law?