Deck 37: Corporate Governance and the Sarbanes-Oxley Act

Question 1

Persons who are shareholders on the record date are entitled to receive the dividend,even if they sell their shares before the payment date.

Answer 1

True

Question 2

In a voting trust,the legal titles to the shares given to the trustee are held in the name of the shareholders.

Answer 2

False

Question 3

The shareholders are responsible for determining how much will be paid in dividends.

Answer 3

False

Question 4

The buy-and-sell agreement allows shareholders to sell their shares to people other than fellow shareholders or the corporation.

Question 5

Proxy solicitation for shareholder votes cannot be made by electronic transmission.

Question 6

Shareholders of a corporation act as agents of the corporation.

Question 7

According to the right of first refusal,a selling shareholder must offer to sell his or her shares to the other parties to the agreement before selling them to anyone else.

Question 8

A derivative lawsuit is brought by the board of directors on behalf of the corporation.

Question 9

A system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open is known as cumulative voting.

Question 10

Shareholder voting agreements have to be filed with the corporation.

Question 11

If a fraud is committed by a member of the board of directors of a corporation,a written notice to the corporation from individual shareholders is not required to bring a derivative lawsuit.

Question 12

The record date,for the declaration of dividends,is set forth in the articles of incorporation.

Question 13

One of the powers of a shareholder is his or her right to elect the board of directors.

Question 14

Once declared,a cash or property dividend cannot be revoked.

Question 15

The board of director's right to inspection can be limited by bylaws.

Question 16

Shareholders do not have to attend a shareholders' meeting to vote.

Question 17

The annual shareholders meeting is held to elect new shareholders.

Question 18

The election of directors of the corporation can be held by electronic transmission.

Question 19

Dividends are distribution of profits of the corporation to shareholders.

Question 20

If a shareholder does not exercise his or her preemptive rights within the stated time,shares can then be sold to anyone.

Question 21

A director who personally competes with the corporation he is employed in would be in breach of duty of obedience.

Question 22

Once the number of board of directors is fixed by the articles of incorporation,the number cannot be amended.

Question 23

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

A)corporate officers
B)shareholders
C)registered agents
D)managing directors

Question 24

The determination of whether a corporate director or officer has met his or her duty of care is measured in hindsight.

Question 25

Usurping a corporate opportunity is a breach that can only be committed by a shareholder.

Question 26

The Sarbanes-Oxley Act requires CEO and CFO certification for annual and quarterly reports.

Question 27

The business judgment rule protects shareholders for honest mistakes of judgment.

Question 28

The ________ Act of 2002 is a federal statute enacted by Congress to improve corporate governance.

A)Brown-Kaufmann
B)Lanham
C)Glass-Steagall
D)Sarbanes-Oxley

Question 29

A corporation is bound to an unauthorized act committed by its corporate officer.

Question 30

The secret profits obtained by a director or officer cannot be recovered by a corporation.

Question 31

The Sarbanes-Oxley Act applies only to public companies.

Question 32

The Sarbanes-Oxley Act contains provisions for prosecuting U.S.firms that bribe foreign officials.

Question 33

To prove usurping by a director or an officer,a corporation must have had the financial ability to have taken advantage of the usurped opportunity.

Question 34

The corporation can recover any profits made by nonapproved competition by a director.

Question 35

The president of a corporation is an example of a corporate officer.

Question 36

Self-dealing is when shareholders use their position to deprive the board of directors of personal monetary gain.

Question 37

Public companies are exempt from the requirement for corporations to have audit committees.

Question 38

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

Question 39

According to the Sarbanes-Oxley Act,members of the audit committee must be members of the board of directors.

Question 40

A director's failure to properly supervise a subordinate who causes a loss to the corporation would be considered a breach of duty of care.

Question 41

The Merrick and Stanley Corporation has 28,000 outstanding shares.During a proposal for a merger,the shareholders decided to increase the quorum of the vote of shareholders to 75 percent,using the supramajority voting rule.How many minimum affirmative votes would be needed to pass the supramajority voting requirement?

A)14,001
B)21,280
C)21,000
D)28,000

Question 42

A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called a(n)________.

A)straight voting
B)accommodation
C)proxy
D)insider director

Question 43

If an Inkilwas Corporation amendment for its articles of incorporation is put to vote at this meeting,which of the following statements would be true with respect to the passing of the amendment?

A)The amendment would not pass as all 30,000 votes have to be represented.
B)The amendment would only pass if all 17,501 votes approve.
C)The amendment would be passed if 4,376 votes approve.
D)The amendment will pass if 8,751 votes approve.

Question 44

The Inkilwas Corporation has 30,000 shares outstanding.A shareholders' meeting is duly called to amend the articles of incorporation,and 17,501 shares are represented at the meeting.
According to the RMBCA,what is the minimum outstanding shares that must be represented in this case to have a quorum?

A)12,001
B)18,501
C)15,001
D)17,501

Question 45

According to the RMBCA,what establishes a quorum to hold a meeting of the shareholders?

A)a majority of outstanding shares
B)a majority of unissued shares
C)a majority of treasury shares
D)a majority of liquidated shares

Question 46

The written document submitted by a person who has been authorized by a shareholder to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is known as ________.

A)record date
B)notice of shareholder's meeting
C)certificate of authority
D)proxy card

Question 47

An arrangement in which the shareholders transfer their stock certificates to a trustee who is empowered to vote the shares is known as ________.

A)supramajority voting
B)voting trust
C)cumulative voting
D)noncumulative voting

Question 48

When is the annual shareholder's meeting held?

A)according to the dates fixed in the bylaws
B)at the whim of the board of directors
C)only if and when there is a crisis
D)only at the time of electing a new board of members

Question 49

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 3000 shares.Suppose that two directors of the corporation are to be elected from a potential pool of 5 candidates.Ester is in favor of Candidates 1 and 5; Mendez in favor of Candidates 2 and 4; Judy in favor of Candidates 4 and 3; and Aaron in favor of Candidates 2 and 3.If the voting was done by straight voting,which of the two candidates are likely to win?

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

Question 50

A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as ________.

A)trust voting
B)noncumulative voting
C)cumulative voting
D)supramajority voting

Question 51

The Kinderfelt Corporation has 15,000 outstanding shares,out of which,Gordon owns 3,000.Kinderfelt Corporation plans to raise more capital by issuing another 10,000 shares of stock.With preemptive rights,how many of the new shares would Gordon have the right to buy before they are sold to the public?

A)10,000
B)3000
C)5000
D)2000

Question 52

A ________ is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else.

A)shareholder voting agreement
B)preemptive sale
C)buy-and-sell agreement
D)right of first refusal

Question 53

________ is a system in which each shareholder votes the number of shares he or she owns on candidates for each of the positions open.

A)Cumulative voting
B)Straight voting
C)Supramajority voting
D)Trust vote

Question 54

Which of the following is true of a shareholder voting agreement?

A)It's an agreement between the board of directors and a shareholder.
B)It has a limited duration of 10 months.
C)It does not have to be filed with the corporation.
D)It is always revocable.

Question 55

Derrick has 2,000 shares of the Unistone Corporation which is planning to vote for two new directors.Through a special voting provision in the corporation's articles of incorporation,Derrick was able to vote for both his preferred candidates with 2,000 shares,giving him a virtual voting count of 4,000 shares.What voting rule in the articles of incorporation allows Derrick to achieve this?

A)supramajority voting
B)noncumulative voting
C)cumulative voting
D)preemptive voting

Question 56

Which of the following is true of shareholders?

A)They cannot enter into contracts that bind the corporation.
B)They cannot vote to elect the board of directors.
C)They cannot take active charge in deciding fundamental changes in the corporation.
D)They are considered as agents of the corporation.

Question 57

________ are rights that give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

A)Rights to first refusal
B)Preemptive rights
C)Rights to share transfer
D)Rights to company ownership

Question 58

An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement is referred to as ________.

A)preemptive sale
B)right of first refusal
C)buy-and-sell agreement
D)shareholder voting agreement

Question 59

The ________ is a requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders.

A)supramajority voting
B)shareholder majority voting
C)quorum share voting
D)cumulative voting

Question 60

A ________ is a date specified in corporate bylaws that determines whether a shareholder may vote at a shareholders' meeting.

A)ballot date
B)reinvestment date
C)record date
D)dividend date

Question 61

Jameson works for Fishy-Mart Corporation,a chain of superstores that sell large quantities of seafood.Jameson's 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.Jameson tells his friend to purchase the property from its current owner,which he does.Jameson 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 here?

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

Question 62

A(n)________ is a member of a board of directors who is not an officer of the corporation.

A)corporate officer
B)CEO
C)ombudsman
D)outside director

Question 63

Which of the following is true of stock dividends?

A)They are the redistribution of corporate assets as shares.
B)They increase an existing shareholder's proportionate ownership interest.
C)They are additional stocks distributed as dividends.
D)They are distributed according to existing ownership interest of the board of members.

Question 64

A lawsuit a shareholder brings against an offending party on behalf of a corporation when the corporation itself fails to bring the lawsuit is known as a ________.

A)notice of the shareholder
B)derivative action
C)class action suit
D)contract action

Question 65

Samson owns 1,500 shares out of the 10,000 outstanding shares of Comakote Corporation.If Comakote Corporation declares a stock dividend of 30 percent,what will be the total stock Samson has upon receiving his stock dividend?

A)2,250
B)4,500
C)1,950
D)5,400

Question 66

Which of the following is true for the board of directors of a corporation?

A)The directors of a board can act individually on the corporation's behalf.
B)Each director has the power of two votes.
C)Directors cannot vote by proxy.
D)Meetings of the board of directors cannot be held without shareholder representation.

Question 67

Which of the following are considered as owners of a corporation?

A)shareholders
B)board of directors
C)the CEO
D)corporate officers

Question 68

________ are a panel of decision makers who are elected by the shareholders.

A)Registered agents
B)Corporate officers
C)Stakeholders
D)Board of directors

Question 69

________ are employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation.

A)Corporate officers
B)Shareholders
C)Registered agents
D)Ombudsmen

Question 70

A member of the board of directors who is also an officer of the corporation is known as a(n)________.

A)inside director
B)ombudsman
C)registered agent
D)shareholder

Question 71

Which of the following is considered an absolute power of corporate directors?

A)the adoption of resolutions
B)the approval of transactions
C)the inspection of the corporation's books and records
D)the declaration of share stocks

Question 72

A director or corporate officer who usurps a corporate opportunity would be in violation of the director's fiduciary duty called ________.

A)duty of obedience
B)duty of loyalty
C)duty of care
D)self-dealing

Question 73

________ is a doctrine that says if a shareholder dominates a corporation and uses it for improper purposes,a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations.

A)Piercing the corporate veil
B)Fruit of the poisonous tree
C)Right of first refusal
D)Self-dealing

Question 74

Which of the following policies helps a corporate officer from being sued for honest mistakes made on behalf of a corporation?

A)duty of loyalty
B)duty of obedience
C)business judgment rule
D)self-dealing

Question 75

Which of the following would be seen as a breach of the duty of loyalty by a corporate officer?

A)straight voting
B)cumulative voting
C)piercing the corporate veil
D)self-dealing

Question 76

A director or corporate officer that does not attend board meetings regularly would be in violation of ________.

A)self-dealing
B)duty of care
C)duty of loyalty
D)duty of obedience

Question 77

Helen works as the vice-president of Gotspeed Corporation,a company that develops and sells sports shoes.Nestor,a private cobbler,makes a new model of shoes that help a user's feet grip the shoe better,and he calls it the Anklator.Nestor's friend fixes an appointment for him with Helen to present his shoe model for possible adoption by Gotspeed.Instead of bringing the opportunity to Gotspeed's board of directors and the corporation,Helen pays Nestor's asking price and purchases the Anklator model for herself.Helen leaves Gotspeed Corporation and forms her own company that manufactures and markets the Anklator shoe models.What breach of the duty of loyalty has Helen committed here?

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

Question 78

Which of the following is true about dividends?

A)Dividends are paid at the discretion of the shareholders.
B)Dividends cannot be used for corporate purposes.
C)Dividends will be paid to shareholders who have sold their shares prior to the record date.
D)Dividends once declared,cannot be revoked.

Question 79

A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders is known as ________.

A)duty of care
B)duty of loyalty
C)duty of obedience
D)self-dealing

Question 80

In which of the following cases can the alter ego doctrine be invoked in a corporate civil case?

A)when shareholders bring a lawsuit on behalf of the corporation after the corporation failed to do it itself
B)when unpaid creditors are trying to collect from shareholders who owe a debt to the corporation
C)when there is a mismanagement of stocks by the board of directors
D)when shareholders are trying to collect for fraud committed by a third-party