Question 1

A duty that requires directors and officers to not 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 ________.

Accepted Answer

The duty described in the question is the duty of loyalty. The duty of care refers to the duty to make informed decisions and act in good faith, while the duty of obedience refers to the duty to act within the bounds of the corporation's legal documents and applicable laws. Self-dealing refers to situations where directors or officers put their own interests ahead of the corporation's interests.

Question 2

The shareholders of a corporation act as agents of the corporation.

Accepted Answer

Shareholders are the owners of a corporation, while the board of directors and officers act as agents of the corporation, making decisions and performing actions on its behalf.

Question 3

Which of the following is true of cumulative voting?

Accepted Answer

Cumulative voting allows minority shareholders to concentrate their voting power on fewer candidates, increasing their chances of electing someone to the board of directors. This is because they can allocate their votes among fewer candidates, giving greater weight to their preferred choices.

Question 4

Marshall is a purchasing agent for DigitoolArt Corporation.His duties require him to negotiate and execute contracts to purchase office supplies and equipment for the corporation.Assume that Bronson,a computer sales representative,pays Marshall a $20,000 kickback to purchase from him computers needed by DigitoolArt Corporation.What breach of the duty of loyalty has Marshall committed here?

Accepted Answer

Marshall has committed a breach of the duty of loyalty by making a secret profit. By accepting a kickback from a supplier, Marshall has put his own interests ahead of DigitoolArt Corporation's interests, which is a violation of his duty to act in good faith and for the benefit of the corporation.

Question 5

Straight voting gives a minority shareholder a better opportunity to elect someone to the board of directors.

Accepted Answer

Straight voting tends to favor majority shareholders, as it allows them to concentrate their votes on fewer candidates and increase their chances of electing their preferred directors. In contrast, cumulative voting can give minority shareholders a better chance of electing at least one director by allowing them to allocate all their votes to a single candidate.

Question 6

Jameson works for Fishy-Mart Corporation,a chain of superstores that sells large quantities of seafood.His 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.He asks his friend to purchase the property from its current owner and 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?

Accepted Answer

Jameson has breached the duty of loyalty by being involved in self-dealing, where he used his position to benefit himself by making a secret agreement with his friend to split the profits. He failed to disclose his interest in the property to Fishy-Mart, and thereby puts his personal gain over the interests of the corporation.

Question 7

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

Accepted Answer

The business judgment rule helps protect corporate officers from being sued for honest mistakes made on behalf of the corporation. This policy assumes that officers acted in good faith and in the best interest of the corporation when making business decisions, unless there is evidence of misconduct or bad faith. The duty of loyalty and duty of obedience require officers to act in the best interest of the corporation, but do not necessarily protect them from being sued. Self-dealing, on the other hand, is when an officer puts their personal interests ahead of the corporation, which leaves them vulnerable to being sued.

Question 8

The annual shareholders' meeting is held to elect new shareholders.

Accepted Answer

The annual shareholders' meeting is typically held for current shareholders to vote on company matters and elect board members, but not to elect new shareholders. Shareholders are individuals or entities who already own shares in the company. They do not need to be elected.

Question 9

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

Accepted Answer

Shareholders can vote by proxy, which means they can delegate their voting rights to someone else or submit their votes electronically. They do not have to physically attend the shareholders' meeting to cast their votes.

Question 10

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

Accepted Answer

An inside director is a member of the board of directors who is also an officer of the corporation. This means that they hold both management and oversight responsibilities within the company. The other options, such as an ombudsman, registered agent, and shareholder, may hold important roles within a company but do not necessarily serve as both a director and an officer.

Question 11

Shareholder resolutions are usually made when the corporation is soliciting proxies from its shareholders.

Accepted Answer

Shareholder resolutions are typically included in proxy statements, which are sent to shareholders when a corporation is soliciting proxies for an upcoming shareholder meeting.

Question 12

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

Accepted Answer

Corporate officers are specifically appointed by the board of directors to run the daily operations of the corporation. Shareholders are individuals who own shares in the corporation, but do not necessarily have a role in managing the company. Registered agents are individuals or companies designated to receive legal documents and notices on behalf of the corporation. Ombudsmen are individuals appointed to investigate complaints and resolve conflicts within an organization.

Question 13

Once a quorum is present,the withdrawal of shares does not affect the quorum of the meeting.

Accepted Answer

Once a quorum is established, the withdrawal of shares does not affect the quorum of the meeting. The quorum is only established at the beginning of the meeting and is not affected by any subsequent changes in the number of shares present.

Question 14

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.

Accepted Answer

The answer of A system in which each shareholder votes...

Question 15

Which of the following is true about dividends?

Accepted Answer

Dividends in cash or property, once declared, cannot be revoked. Option A is incorrect because the decision to pay dividends lies with the board of directors, not shareholders. Option B is incorrect because dividends may be used for corporate purposes after being declared and paid out to shareholders. Option C is incorrect because only shareholders on record as of the record date will receive dividends.

Question 16

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

Accepted Answer

The answer of ________ is a system in which each...

Question 17

Helen is the vice-president of Gotspeed Corporation,a company that designs,manufactures and sells sports shoes.Nestor,an independent entrepreneur,designs a new shoe that helps the user's foot grip the shoe better,and he calls it the Anklator.Nestor's friend schedules an appointment for him to meet Helen and present the Anklator for possible adoption by Gotspeed.Instead of presenting the opportunity to Gotspeed's board of directors,Helen pays Nestor's asking price and purchases the Anklator design for herself.She then quits and forms her own company to manufacture and sell Anklator shoes.Helen has breached her duty of loyalty to Gotspeed Corporation by ________.

Accepted Answer

Helen has usurped a corporate opportunity by purchasing the Anklator design for herself instead of presenting it to Gotspeed's board of directors. As the vice-president of Gotspeed, she had a duty to act in the best interest of the corporation and not take advantage of opportunities that rightfully belong to the company.

Question 18

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

Accepted Answer

The alter ego doctrine can be invoked in a corporate civil case when unpaid creditors are trying to collect from shareholders a debt owed by the corporation. This is because the doctrine allows for the piercing of the corporate veil, which essentially treats the corporation and its shareholders as one and the same for legal purposes. In this scenario, the creditors are seeking to hold the shareholders personally liable for the debt of the corporation, which is exactly what the alter ego doctrine allows for. The other options do not involve situations where the alter ego doctrine would apply.

Question 19

Which of the following constitutes a breach of the duty of loyalty by a corporate officer?

Accepted Answer

Self-dealing involves a corporate officer taking advantage of their position for personal gain, which is a clear breach of the duty of loyalty. Straight and cumulative voting relate to corporate governance and do not necessarily involve a breach of the duty of loyalty. Piercing the corporate veil refers to a legal concept where the separation between a corporation and its shareholders is disregarded, and is not an action taken by a corporate officer.

Question 20

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

Accepted Answer

The board of directors of a company is responsible for determining the amount of dividends to be paid out to shareholders, not the shareholders themselves.

Quiz 16: Corporations and Corporate Governance