Exam 20: Directors Officers And Controlling Shareholders

Yoshi,a ballroom dance instructor,was recently asked to be a director of ABC Company,which is publicly traded.Although Yoshi is honored and excited,a friend,Joey,asks whether Yoshi had any experience in accounting,business,or SEC requirements.Yoshi explained that the president of ABC had given assurances that the only responsibility of a director was acting as a figurehead because the officers took care of all detailed corporate business.Yoshi believes accepting the position will provide greater exposure in the community and perhaps increase dance clientele.Is Yoshi correct regarding the responsibilities of a director,and why or why not?

To comply with their duty of loyalty,directors and managers must subordinate their own interests to those of the corporation.

What are the seven key factors that directors should consider in deciding whether to sell a company?

What is a poison pill? What factors favor keeping a poison pill in place?

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

In Case 20.4 Jones v.H.F.Ahmanson & Co.(1996),the court ruled that the majority shareholders who transferred their shares to a holding corporation,then took it public without allowing the minority to exchange their shares,breached their fiduciary duty to the minority shareholders.What did the court award to the minority shareholders in the way of damages?

Brice is on the board of ABC Corporation.XYZ Corporation has made a move to acquire ABC.Taylor,the president of ABC,advises the board that the offer made by XYZ is a good one that should be accepted.Taylor did not disclose,however,that XYZ had offered a generous bonus if Taylor could convince the board members of ABC to take XYZ's offer.Brice tells the other board members that they should simply rely on Taylor,who is probably right,and under the business judgment rule they are protected even if Taylor is wrong.Which of the following is true regarding Brice's advice?

Managers or directors who are engaged in self-dealing or have a self-interest other than that of a corporate fiduciary have:

In Carmody v.Toll Bros.,Inc.,the Delaware Court of Chancery analyzed the question of the legality of a dead-hand pill under Delaware law.In striking down the dead-hand pill,the court ruled that:

The duty of __________ requires officers to exercise reasonable supervision over the business affairs of the corporation.

In 2015,the SEC adopted a rule that requires public companies to disclose the pay ratio of the median of the annual total compensation of all employees to the annual total compensation of the CEO.

To help make the bidder whole for its out-of-pocket expenses and lost opportunity costs should a deal fail to close because the target terminates the agreement,a negotiation will often include a termination fee.

__________ is a purchase of a dissident shareholder's stock by the issuer at a premium over market,often in exchange for a standstill agreement,whereby the shareholder agrees not to commence a tender offer or proxy contest or to buy additional shares of the issuer for a period of time.

A transaction that benefits a director's self-interest is voidable:

Breakup fees are liquidated damages for a terminated proxy fight.

A contractual provision insisted upon by a bidder limiting the ability of board members to negotiate with other bidders is referred to as a(n)__________ clause.

A shareholder who owns sufficient shares to outvote the other shareholders or to otherwise set corporate policy and thus to control the corporation is known as a(n)__________ shareholder.

In CASE 20.1 Smith v.Van Gorkom (1985),plaintiff-shareholders alleged the directors were grossly negligent in failing to inform themselves adequately before making a decision about a merger.How did the court rule and why?

In evaluating a buyout proposal,the directors should consider material nonprice provisions of the proposed agreement.

Companies listed on the New York Stock Exchange must have compensation committees composed entirely of independent directors.