Deck 35: Shareholders

Question 1

If a public company decides not to solicit proxies for a shareholder meeting,it need not give shareholders the information that would have been required in a proxy statement.

Answer 1

False

Question 2

Alberta is not employed by E-prise,Inc.but she is a member of E-prise's board of directors.Alberta is an outside director.

Answer 2

True

Question 3

A corporation's obligation to provide shareholders with financial information:

A) depends on whether the company is publicly or privately held.
B) depends on the requirements of the Model Business Corporation Act, which is widely followed in regard to the shareholders' right to information.
C) is extensive and is carefully regulated by the SEC if the company is privately held.
D) All the above.

Answer 3

A

Question 4

Who has the right to manage the business of a corporation?

A) Shareholders.
B) Officers.
C) Bondholders.
D) The board of directors.

Question 5

A derivative lawsuit is filed by the directors on behalf of the corporation against third parties who have committed wrongful acts and/or breaches of contract.

Question 6

Jan is a controlling shareholder in E-treme,Inc.Under the law,controlling shareholders must include minority shareholders in any favorable arrangements that they make for their own stock.

Question 7

There is a trend for boards of directors to be made up of more independent directors who are less likely to simply go along with whatever the CEO wants.

Question 8

A proxy is a vote that is mailed in,like an absentee ballot.

Question 9

Unless the form provides for a longer period,a proxy is valid for how long under the Model Act?

A) 90 days.
B) six months.
C) 11 months.
D) one year.

Question 10

Alfrieda purchased an ownership interest in a corporation.This gives her the right to use the equipment owned by the corporation,as long as her usage does not interfere with the normal operation of the business.

Question 11

In a derivative lawsuit,the named plaintiff:

A) is the corporation on whose behalf the lawsuit is filed.
B) is the particular class of shareholders primarily injured by the wrong.
C) consists of all the corporation's shareholders.
D) is the board of directors for the corporation.

Question 12

A corporation is required to have at least one class of stock with voting rights.

Question 13

If directors serve on the boards of multiple corporations,the executives of those corporations are less likely to be overpaid.

Question 14

Matt,a dissident shareholder,can run for director by placing his name on the company's proxy statement.

Question 15

A shareholder proxy is generally revocable at any time.

Question 16

Larry has owned $5,000 of stock in E-prise,Inc.for the past 18 months.Under SEC rules,Larry can require that one proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.

Question 17

Controlling shareholders have no fiduciary responsibility to minority shareholders.

Question 18

In either a derivative lawsuit or a direct shareholder lawsuit,any proceeds awarded by the court must be paid to the corporation,not the shareholders themselves.

Question 19

Under the Model Act,who has the right to call a special meeting of the shareholders to vote on an emergency issue that cannot wait until the next annual meeting?

A) Shareholders who own at least 10 percent of a company's stock.
B) The board of directors.
C) Both of the above.
D) None of the above.

Question 20

In reality,the officers of the large corporations have a great deal of influence on who will be nominated and elected as directors.

Question 21

A corporation must obtain shareholder approval before the company:

A) sells off a major portion of its business to another company.
B) amends its bylaws.
C) amends its charter.
D) All the above are correct.

Question 22

Shareholder proposals on the company proxy statement:

A) must be stated in the form of a request or recommendation according to SEC rules.
B) may only be implemented by the company if they receive support from at least a simple majority of the shareholders.
C) are, in about half of the cases, withdrawn before a vote because the company decides to implement the proposal.
D) may address only corporate-governance issues, such as cumulative voting or executive compensation, but may not address the shareholder's political agenda, such as saving the environment.

Question 23

A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:

A) it pays a fair price for Glenn's stock.
B) there is a legitimate business purpose for expelling him.
C) Both of the above.
D) Neither a nor b

Question 24

To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:

A) the board was grossly uninformed before it set the compensation amount.
B) the executive's performance caused the business to become unprofitable.
C) the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company.
D) the compensation level is not in the company's best interests.

Question 25

Under SEC rules,companies:

A) can require electronic delivery of proxy statements to save mailing costs and improve operating efficiency of the corporation.
B) are required to post the information in the annual report and the proxy statement on their Web site, but must mail to shareholders either hard copies of all the information or a card telling them how the vote online.
C) must solicit proxies because a shareholder meeting is invalid unless a certain percentage of shareholders attend in person or by proxy.
D) must give each shareholder a proxy, but not a proxy statement or an annual report, if the company is a public company.

Question 26

Frank is a controlling shareholder in E-prise,Inc.Frank:

A) may not enter into unfair business transactions with the corporation.
B) has a fiduciary duty to minority shareholders.
C) may not exclude minority shareholders from beneficial arrangements involving stock.
D) All of the above are correct.

Question 27

Lucy owns 10 shares of stock in Quamba,Inc.Lucy wishes to place a proposal in a company's proxy statement to be voted on at the shareholders' meeting.Pursuant to the SEC rules,before Lucy is allowed to place her proposal on the proxy statement she must:

A) have owned continuously for one year at least one percent of the company and $2,000 or more of the stock.
B) have owned continuously for one year at least one percent of the company or $2,000 or more of the stock.
C) have the permission of the board of directors.
D) have been a stockholder for at least two years.

Question 28

Luella just purchased 5 shares of common stock in TriColor,Inc.for $250.Luella has the right to:

A) manage the day-to-day business of the corporation.
B) set executive compensation.
C) require that a proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.
D) vote to elect directors.

Question 29

Which of the following is correct concerning the SEC regulations on shareholder resolutions?

A) The proposals cannot be used to seek to satisfy a personal grievance against the company.
B) The proposals cannot relate to the ordinary business operations of the corporation.
C) The proposals must relate to operations accounting for at least 5 percent of total assets, gross sales, or net earnings.
D) All the above are correct.

Question 30

Kian is the chief financial officer of Yonkka,Inc.He is also a member of Yonkka's board of directors.Kian is:

A) an inside director.
B) an outside director.
C) holding an illegal position.
D) a public director.

Question 31

Quick Supply House breached a contract with MegaCorp.The breach resulted in the loss of a great deal of money to MegaCorp.The board of directors for MegaCorp vote not to sue the supply house since it believes the legal costs would be more than it would probably recover.If a group of shareholders wish to sue the supply house,this would:

A) be a type of direct lawsuit.
B) have to be a derivative lawsuit.
C) be a settlement lawsuit.
D) be an SEC lawsuit.

Question 32

Ev-R-Green Co.,a private corporation,decides to sell substantially all of the company's assets.Under the Model Act and many state statutes:

A) the sole remedy for dissenting shareholders is to sell their stock on the stock exchange.
B) the board must first get unanimous shareholder approval for this fundamental change.
C) Ev-R-Green must buy back, at fair value, the stock of any shareholders who object to the decision.
D) the company may buy back, at fair value, the stock of any shareholders who object to the decision or the shareholders who object may receive the right of first refusal to purchase corporate assets.

Question 33

Maureen,a shareholder of Metra,Inc.,is unhappy with how the corporation was being managed.Maureen wants to be a member of Metra's board of directors.Which statement is correct?

A) If Maureen owns at least 1 percent or $2,000 of Metra's stock, she can require the company to include her name as a candidate for the board of directors in its proxy statement.
B) If Maureen has a proper purpose, she can require the company to include her name as a candidate for the board of directors in its proxy statement.
C) If Maureen can show cause, she can require the company to include her name as a candidate for the board of directors in its proxy statement.
D) Maureen cannot require that the company put her name in the proxy statement, but she can prepare and distribute her own proxy.

Question 34

Before filing a derivative lawsuit,shareholders must:

A) notify the board that the corporation has been wronged and ask the board to bring suit in the name of the corporation directly.
B) notify the Secretary of State that the corporation has been wronged and ask the Attorney General to file the lawsuit on behalf of the corporation.
C) hold a special meeting, and a majority of the shareholders must vote to file the lawsuit.
D) place the lawsuit on the company's proxy statement, and the proposal must receive a majority vote.

Question 35

Veritas,Inc.is planning its annual shareholder meeting on June 15.The company:

A) need not send notices of the meeting to shareholders since it is the regularly scheduled, annual meeting, which Veritas always holds on the third Thursday of June.
B) must send notices to everyone who owns stock as of January 1.
C) must send notices to everyone who owns stock on the "record date," which can be no more than 70 days before the meeting.
D) is not required to have an annual shareholders meeting if the company is listed only on the NYSE.

Question 36

Meredith,a shareholder in Quarto,Inc.,notified Quarto's board of directors that the corporation had been wronged and asked the board to bring a lawsuit in the corporation's name.In response to Meredith's demand,the board:

A) can file suit on behalf of the corporation.
B) can reject Meredith's demand or simply fail to respond.
C) can appoint a Special Litigation Committee.
D) can do any of the above.

Question 37

Charles owns 1,000 shares of stock in Temperan,Inc.Charles wants to obtain corporate records including the corporation's minute book and accounting records.Under the Model Act,Charles is entitled to this information if he requests it in good faith and:

A) he has a proper purpose.
B) he owns at least 1 percent of the company or $2,000 of stock.
C) he is an employee of Temperan.
D) he is a controlling shareholder.

Question 38

A "fundamental change" in a corporation would be illustrated by:

A) E-prise, Inc. merging with Vitta Corporation.
B) the voluntary dissolution of Oldtry, Inc.
C) the amendment to bylaws of Chaney Company.
D) All of the above.

Question 39

Who establishes executive compensation?

A) The board of directors.
B) The shareholders.
C) The officers themselves.
D) An independent CPA firm.

Question 40

The proceeds,if any,of a derivative lawsuit go to:

A) the shareholders of the corporation.
B) the shareholders who actually filed the lawsuit.
C) the board of directors.
D) the corporation.

Question 41

Loraine is a shareholder of Taley Corp.She would like to inspect and copy the company's minute book,accounting records,and shareholder lists.Under what circumstances is Loraine allowed to inspect or copy corporate records?

Question 42

Kalina is the CEO of Northfield Corporation.Who sets her compensation,and what types of compensation would she likely receive in addition to her salary? Can shareholders do anything to challenge her level of compensation if they think it is unfairly high in comparison to average employee compensation within the company?

Question 43

Vernon and David are the controlling shareholders in E-treme,Inc.Discuss the obligations that Vernon and David owe to the minority shareholders.

Question 44

Discuss how the Sarbanes-Oxley Act affects Haletronne Co.,a publicly traded corporation.

Question 45

Kris,a shareholder of E-Max,Inc.,claimed that the business was being mismanaged.Kris notified the board of directors that the corporation has been wronged and asked the board to bring suit in the name of the corporation directly.In response to Kris' demand,what actions may the board take? What could Kris's response be to each alternative?