Deck 34: Corporate Directors, officers, and Shareholders

Question 1

Many states permit a corporate board to have fewer than three directors.

Answer 1

True

Question 2

Shareholders appoint corporate officers and other executive employees.

Answer 2

False

Question 3

Corporate officers can normally be removed by the board of directors without cause.

Answer 3

True

Question 4

A new position on a board of directors can be created by an amendment to the articles of incorporation.

Question 5

Directors are not expected to act in accordance with their own knowledge and training,but to rely on information given to them by certain other persons.

Question 6

The initial board of directors of a corporation is normally elected at the first annual shareholders' meeting by a majority vote of the shareholders.

Question 7

The minimum number of members of a body of officials that must be present before business can validly be transacted is known as a quorum.

Question 8

Publicly held corporations typically create committees of directors and delegate certain tasks to these committees.

Question 9

Each director present at a board meeting has one vote.

Question 10

A director must always vote on a proposed transaction in which he or she has a personal interest.

Question 11

The ordinary rules of agency normally apply to the employment of corporate officers.

Question 12

Any individual director can act as an agent to bind the corporation.

Question 13

A director or officer must exercise due care in performing their duties,including acting in good faith.

Question 14

The board of directors is the ultimate authority in every corporation.

Question 15

A director can be elected by the other members of the board.

Question 16

Corporate directors and officers are insurers of business success.

Question 17

Directors can delegate work to corporate officers and employees.

Question 18

Directors must refrain from self-dealing.

Question 19

Most states do not allow directors to participate in board of directors' meetings from remote locations.

Question 20

A corporation's officers and other executive employees are hired by corporate shareholders.

Question 21

In some states,a director can be removed from a corporate board without cause.

Question 22

As a general rule,shareholders make daily business decisions for a corporation.

Question 23

Every shareholder is entitled to examine specified corporate records but only in person,not through an agent.

Question 24

A majority vote of the shares represented at a shareholders' meeting is usually required to pass resolutions.

Question 25

Since stock is intangible personal property,the ownership right to stock exists independently of a stock certificate.

Question 26

Dividends can be paid in cash or property,but not in stock in other corporations.

Question 27

Clive,Doris,and Elgar are the first directors on the board of Face x Face Corporation,a social media host. Subsequent directors are elected by a majority vote of Face x Face's

A)users.
B)employees.
C)officers.
D)shareholders.

Question 28

Shareholders can elect and remove the directors of the corporation.

Question 29

The articles of incorporation can exclude or limit shareholders' voting rights.

Question 30

Security Insurance,Inc. has a board of ten directors. Security's bylaws do not state any quorum requirements. In most states,a quorum for Security's board meetings would be

A)two directors.
B)six directors.
C)nine directors.
D)ten directors.

Question 31

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

Question 32

With preemptive rights,shareholders preempt the decisions of directors and officers with respect to corporate policy.

Question 33

When shareholders want to change a company policy,they can put their idea up for a shareholder vote.

Question 34

For shareholders to act during a shareholders' meeting,a quorum must be present.

Question 35

Aviators Source Corporation makes and sells aircraft parts. In most states,the minimum number of directors that must be present before Aviators Source's board could transact its business is

A)all of the directors authorized in the articles or bylaws.
B)a majority of the number authorized in the articles or bylaws.
C)any odd number.
D)one.

Question 36

A majority shareholder does not owe a fiduciary duty to minority shareholders under any circumstances.

Question 37

Roddy is elected as a director to the board of Salt n' No-Salt Snax,Inc. He will most likely serve for a term of

A)about ten years.
B)less than one year.
C)life.
D)one year.

Question 38

When the corporation is harmed by the actions of a third party,the directors can bring a lawsuit in the name of the corporation against that party.

Question 39

Shareholders are not personally liable for the debts of a corporation.

Question 40

Bret and Courtney form Delite Day Care,Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Delite's

A)board of directors.
B)incorporators.
C)officers.
D)shareholders.

Question 41

Pat owns one share of stock in Quik Smoothies Corporation,as evidenced by a stock certificate. Because stock is intangible personal property,Pat's ownership of the stock

A)exists independently of the stock certificate.
B)cannot exist without a tangible stock certificate.
C)cannot exist without the original stock certificate.
D)cannot be transferred without the stock certificate.

Question 42

Farrah and Grant are shareholders of Hong Kong Restaurants,Inc. As shareholders,they must approve

A)conducting a merger.
B)deciding to pursue new business opportunities.
C)none of the choices.
D)negotiating a contract between management and labor.

Question 43

Ernesto is a director of Fine Art Dealers,Inc. Ernesto is trained in art valuation. Fine Art makes several purchases in which it pays too much for artwork. Ernesto approves all the transactions without reading the details. Ernesto is most likely liable for breach of

A)the duty of care.
B)none of the choices.
C)the duty of loyalty.
D)the business judgment rule.

Question 44

Corporate business matters are presented at a shareholders' meeting of Hollywood Lights,Inc.,and other corporations in the form of

A)resolutions.
B)proxies.
C)articles of incorporation.
D)bylaws.

Question 45

Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Home Furnishings Inc. As directors,they may NOT

A)authorize major corporate policy decisions.
B)decide to issue stock and bonds,and declare dividends.
C)select and remove corporate officers.
D)subordinate the corporation's welfare to their personal interests.

Question 46

Nora is a director of Outback Outfitters,Inc. Under the standard of due care owed by directors of a corporation,Nora's decisions must be informed and

A)reasonable.
B)unquestionable.
C)indefensible.
D)perfect.

Question 47

Emma is a director of Fab Styles Corporation. Without informing Fab,Emma goes into business with GR8 Trends,Inc.,in competition with Fab. Emma is li-able for breach of

A)none of the choices.
B)the business judgment rule.
C)the duty of care.
D)the duty of loyalty.

Question 48

RayAnn is a corporate officer for Shady's Trees,Inc. As a corporate officer,RayAnn is

A)the head of the board of directors.
B)involved in the day-to-day operations of the firm.
C)not involved in the day-to-day operations of the firm.
D)in charge of selecting members of the board of directors.

Question 49

Shannon is an officer for Turista Shirts Corporation. Due to a bad business decision on Shannon's part,the company's sales decrease. Shannon is most likely liable for breach of

A)the business judgment rule.
B)the duty of care.
C)the duty of loyalty.
D)none of the choices.

Question 50

Holly is a director of International Spices,Inc. As a director,with respect to the corporation,Holly is

A)a fiduciary.
B)an incorporator.
C)an officer.
D)an employee.

Question 51

Thor Power Products Corporation permits its directors to be elected by cumulative voting. This inspection rights.

A)allows minority shareholders to be represented on the board.
B)assures directors that they will be selected by their peers.
C)guarantees Thor's executive officers of the final choice.
D)ensures against persons who may "cloud" the corporate direction.

Question 52

Coast-to-Coast Distribution,Inc.,is a national trucking company. Like most corporations,Coast-to-Coast's employees include its

A)board of directors.
B)incorporators.
C)officers.
D)shareholders.

Question 53

Rafi,a director of Super Service Station Corporation,does not attend a board meeting for three years. During that time,Todd,Super's president,makes improper loans that cost the company $1 million. Rafi is most likely

A)liable for negligence.
B)liable for violation of the business judgment rule.
C)not liable because missing meetings is an honest mistake.
D)not liable because missing meetings is only poor judgment.

Question 54

Karen and Laura are officers of Marketing Wizards Inc. As corporate officers,the rights of Karen and Laura are

A)determined by their employment contracts.
B)specified in state corporation statutes.
C)the same as those of the directors.
D)the same as those of the shareholders.

Question 55

Rosa and Sean are shareholders of T-Rex Tacos,Inc. Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is

A)a violation of the duty of care.
B)a preemptive right.
C)a proxy.
D)a quorum.

Question 56

Lewis is a director of Mines & Refineries,Inc. Using information that is not available to the public,Lewis makes a profit trading in Mines & Refineries securities. Lewis is most likely liable for breach of

A)none of the choices.
B)the business judgment rule.
C)the duty of loyalty.
D)the duty of care.

Question 57

Mieko is a shareholder of Natural Gas,Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mieko's votes is determined by the number of

A)years that Mieko has been a shareholder.
B)members of the board to be elected multiplied by the total number of voting shares that Mieko holds.
C)shareholders present at the shareholders' meeting.
D)shareholders' meetings that Mieko has attended.

Question 58

Rihanna owns one share of stock in SportBoards Corporation,as evidenced by a stock certificate. Rihanna loses the certificate. Her ownership of the stock is

A)forfeited immediately.
B)forfeited within ten days of a third party's claim to ownership.
C)forfeited within thirty days if she cannot find the certificate.
D)not affected.

Question 59

The board of Management Consultants,Inc. (MCI),can delegate work to

A)MCI's incorporators.
B)MCI's officers.
C)MCI's shareholders.
D)no one.

Question 60

Carlo is a director of Desserts Italiano,Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of

A)none of the choices.
B)the business judgment rule.
C)the duty of care.
D)the duty of loyalty.

Question 61

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc. Liberty has nine officers and forty-six shareholders. Dividends are ordered by the firm's

A)board of directors.
B)minority shareholders.
C)officers.
D)majority shareholders.

Question 62

Nelson is Organic Coffee Company's majority shareholder. Nelson decides to sell his Organic Coffee stock. The sale will be an effective transfer of the control of the company. Does Nelson owe a duty to Organic Coffee or its minority shareholders in this situation?

Question 63

Any damages recovered by Darius's suit will normally go to

A)Darius.
B)Energy Renewable.
C)Energy Renewable's directors.
D)Energy Renewable's shareholders.

Question 64

Bea is a shareholder of Chocolate Confections Corporation. Bea has the right to inspect corporate books and records inspection rights.

A)only if she is a director.
B)without restrictions.
C)with some restrictions.
D)under no circumstances.

Question 65

Kelly transfers shares of stock that she owns in Laundry Management Company to Max. A shareholders' meeting takes place before Max's ownership is entered in Laundry's stock book. A vote at the meeting can be cast by

A)Kelly and Max.
B)Kelly only.
C)Max only.
D)neither Kelly nor Max.

Question 66

Gayle is a shareholder of Harbor Bay Equipment Inc. with preemptive rights. With these rights,Gayle can

A)buy a prorated share of a new issue of stock before other buyers.
B)choose to have Matchless act exclusively in a certain area.
C)"preempt" managerial decisions that affect shareholders.
D)sell a prorated share of a new issue of stock before other sellers.

Question 67

Noel is a majority shareholder of Oil Change Shops Inc. Using this control,Noel excludes Polly,a minority shareholder,from benefits of participating in the firm. Polly can

A)assert the business judgment rule.
B)bring a suit for damages.
C)exercise de facto control.
D)force a cumulative vote.

Question 68

Donatello is a director and officer of Enzio's Pizza Corporation. Donatello selects an ad campaign that consumers find offensive-a marketing decision that results in a dramatic decrease in profits for the firm and its shareholders. The shareholders accuse Donatello of breaching his fiduciary duty to the corporation. What is Donatello's best defense against this accusation? Later,a resolution comes before Enzio's board to expand its menu to compete with Fabio's Pasta Palace Restaurants Inc. Donatello is a director and shareholder of Fabio's. What is Donatello's responsibility in this situation?

Question 69

Generally,Office Paper Products Company and other corporations can pay dividends if

A)the corporation can continue to pay its debts as they come due.
B)the amount of the dividends exceed the corporation's net worth.
C)the shareholders approve.
D)the corporation's assets equal its total liabilities.

Question 70

Darius is a shareholder of Energy Renewable,Inc. When the directors fail to undertake an action to redress a wrong suffered by the corporation,Darius files a suit on the firm's behalf.
Darius's suit is a shareholder's

A)reimbursement suit.
B)derivative suit.
C)business judgment rule suit.
D)preemptive suit.

Question 71

Ally is a shareholder of Bank of Trade Inc. As a shareholder,Ally does not have inspection rights.

A)a right to compensation.
B)dividend rights.
C)inspection rights.
D)preemptive rights.

Question 72

Brandi is a shareholder of Cloud Servers & Routers Inc. Brandi will be deemed to have a fiduciary duty to Cloud and its minority shareholders if she has a sufficient number of shares to

A)assert the business judgment rule.
B)bring a shareholder's derivative suit.
C)exercise de facto control.
D)participate in a cumulative vote.