Question 1

Nick, a director of Oil Inc., is specially trained in petroleum trading. Oil's board approves several deals in which the company pays too much for petroleum. Nick approves all the deals without first reviewing them. Nick is most likely liable for breach of

Accepted Answer

Nick is likely liable for breach of the duty of care because he approved deals without reviewing them, which indicates negligence in his responsibilities as a director.

Question 2

Olivia is a director of Property Managers Inc. As a director, with respect to the corporation, Olivia is

Accepted Answer

Directors of a corporation, like Olivia, are fiduciaries. They have a legal obligation to act in the best interests of the corporation and its shareholders.

Question 3

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

Accepted Answer

In most states, a quorum for a board meeting is a majority of the directors. With five directors, a majority would be three directors.

Question 4

Freight Dispatch Corporation is a distribution company. Like most corporations, Freight's employees include its

Accepted Answer

Officers are employees of a corporation who manage the day-to-day operations, unlike directors, incorporators, or shareholders who are not typically considered employees.

Question 5

Most states define a quorum as

Accepted Answer

A quorum is typically defined as a majority of the number of directors authorized in the articles or bylaws.

Question 6

Rita is an officer of Savor Tea Inc. As a corporate officer, Rita's rights and duties primarily are defined by

Accepted Answer

Rita's rights and duties as a corporate officer are primarily defined by her employment contract with the company, which outlines her responsibilities, compensation, and other terms of her employment.

Question 7

As a director of InstaTalk Inc., Jim has a right of inspection. This right

Accepted Answer

A director's right of inspection is fundamental and cannot be restricted by corporate articles, bylaws, or board actions.

Question 8

Oversight Inc.'s board of directors votes to empower corporate officers to make decisions regarding ordinary, daily corporate affairs within well-defined guidelines. With respect to these affairs, Oversight's board

Accepted Answer

Even though corporate officers are now empowered to make decisions regarding daily corporate affairs, the board of directors retains its responsibility for overseeing the activities of the corporation. The board still has the ultimate responsibility for ensuring that the company is being run in a way that is aligned with shareholder interests and that it is in compliance with all relevant laws and regulations.

Question 9

Rikki is a director of STEM Inc. As a director, with respect to the corporation, Rikki is expected to use

Accepted Answer

Directors are expected to use prudent business judgment in managing corporate affairs, acting in the best interest of the corporation and its shareholders.

Question 10

A vacancy occurs on the board of directors of Data Storage Inc. How the vacancy is filled most likely depends on Data's

Accepted Answer

The answer of A vacancy occurs on the board of...

Question 11

Owen is a director of Packaging Company. As a director, Owen's rights include a right to

Accepted Answer

As a director, Owen has the right to access the corporation's books, records, facilities, and other property to properly perform his duties and responsibilities. However, he does not have the right to subordinate the corporation's welfare to his personal interest, use confidential information for personal advantage, or engage in self-dealing. These actions would be considered breaches of his fiduciary duties and could incur legal consequences.

Question 12

When directors vote on issues affecting the corporation, ordinary matters generally require

Accepted Answer

Ordinary matters generally require a majority vote of the directors.

Question 13

Biff is a director of ChemCo Inc. Because of this position, Biff becomes involved in litigation. With respect to the costs, fees, and damages involved, he has a right to

Accepted Answer

As a director, Biff has the right to be reimbursed or indemnified for costs, fees, and damages incurred in litigation related to his role, provided he acted in good faith and in the best interests of the corporation.

Question 14

Global Enterprises Inc. ' s board of directors can delegate some of its functions to

Accepted Answer

The board of directors can delegate certain functions to an executive committee, which is a smaller group of board members authorized to make decisions on behalf of the full board.

Question 15

Blue Sky Drones Inc. has three directors, a president, two vice presidents, a secretary, and a treasurer. Carol is a Blue Sky director. In most states, Carol

Accepted Answer

In most states, it is common for directors to also hold corporate offices. There is no legal prohibition against a director serving as an officer, such as president, vice president, secretary, or treasurer, unless the corporation's bylaws or articles of incorporation state otherwise.

Question 16

Opal is an officer of Peaches n' Pears Inc. The board removes Opal in violation of an employment contract. Peaches may be liable for breach of

Accepted Answer

Peaches n' Pears Inc. may be liable for breach of contract because removing Opal in violation of an employment contract directly breaches the terms agreed upon in that contract.

Question 17

Buck is a director on the board of Construction Corporation. The board delegates work to Don, Construction's president, and other corporate officers. Buck fails to reasonably supervise the work. He is most likely liable for

Accepted Answer

Buck is likely liable for negligence or mismanagement because as a director, he has a duty to supervise the work of corporate officers reasonably. Failure to do so can result in liability for negligence or mismanagement.

Question 18

Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate

Accepted Answer

As a director, Kathy has a fiduciary duty to act in the best interest of the corporation and its shareholders. This means that she should subordinate her personal interests to the corporation's welfare. Choosing option B would only result in her breaching her fiduciary duty, which could result in legal consequences. Choosing option C would be expected of Kathy as a director, but it does not accurately define her primary duty. Option D deals more specifically with the shareholders' interests, but again, Kathy's primary duty is to act in the corporation's best interest as a whole.

Question 19

A decision to outsource the production of major components for a product likely is the responsibility of the

Accepted Answer

The answer of A decision to outsource the production of...

Question 20

Orin is a corporate officer for Pacific Trade Inc. In this capacity, Orin

Accepted Answer

As a corporate officer, Orin is typically responsible for managing the day-to-day operations of the corporation. Major policy decisions and dividend declarations are usually the responsibility of the board of directors.

Quiz 30: Management of a Corporation