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.

Accepted Answer

If a public company decides not to solicit proxies for a shareholder meeting, it must still provide shareholders with the information required by law in a Notice of Meeting. The information may be presented in a different format than a traditional proxy statement, but it must still be provided to shareholders.

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.

Accepted Answer

An outside director is a member of a company's board of directors who is not an employee or stakeholder of the company. Therefore, since Alberta is not employed by E-prise, Inc. but is a member of their board of directors, she is considered an outside director.

Question 3

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

Accepted Answer

Publicly held companies are required by the SEC to provide financial information to shareholders, while privately held companies have fewer obligations.

Question 4

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

Accepted Answer

The board of directors has the right to manage the business of a corporation. They are elected by the shareholders and are responsible for making major decisions and setting policies for the company. Shareholders, officers, and bondholders may have some influence or decision-making power, but the ultimate authority rests with 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.

Accepted Answer

A derivative lawsuit is actually filed by shareholders 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.

Accepted Answer

This statement is true as controlling shareholders have a fiduciary duty to act in the best interests of all shareholders and to not unfairly benefit themselves at the expense of minority shareholders. This duty includes including minority shareholders in any favorable arrangements 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.

Accepted Answer

This statement accurately reflects the current trend of boards of directors seeking more independent directors who can hold the CEO accountable and provide diverse perspectives.

Question 8

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

Accepted Answer

A proxy is not a vote itself but rather a form of delegation, where one person authorizes another to vote on their behalf, often seen in corporate settings. An absentee ballot is a method for casting votes in an election when a voter cannot be physically present at the polling place.

Question 9

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

Accepted Answer

The answer of Unless the form provides for a longer...

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.

Accepted Answer

Ownership of shares in a corporation does not necessarily give an individual the right to use the corporation's equipment. The corporation's bylaws or shareholder agreements would need to specifically state such a right.

Question 11

In a derivative lawsuit,the named plaintiff:

Accepted Answer

In a derivative lawsuit, the named plaintiff is the corporation on whose behalf the lawsuit is filed. This type of lawsuit is filed by a shareholder on behalf of the corporation because the corporation itself cannot initiate a lawsuit against itself. The named plaintiff represents the interests of the corporation and seeks to recover damages from those who have wronged the corporation.

Question 12

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

Accepted Answer

This is true. According to most state corporation laws, a corporation must have at least one class of stock with voting rights in order to function as a business entity.

Question 13

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

Accepted Answer

The statement is logically incorrect. There is no direct correlation between the number of directorships held by a person and the level of executive compensation. In fact, some studies suggest that multiple directorships can lead to conflicts of interest and actually result in higher executive pay.

Question 14

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

Accepted Answer

A dissident shareholder cannot run for director by placing his name on the company's proxy statement.

Question 15

A shareholder proxy is generally revocable at any time.

Accepted Answer

A shareholder proxy gives the shareholder the ability to appoint someone else to vote on their behalf at a shareholder meeting. The shareholder can revoke this proxy at any time before the meeting, giving them the ability to vote in person or appoint someone else to vote for them.

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.

Accepted Answer

According to SEC rules, shareholders who have owned $2,000 or more in stock for at least one year can require that one proposal be included in the company's proxy statement. Since Larry has owned $5,000 of stock for 18 months, he meets this requirement and can require a proposal to be included in the proxy statement.

Question 17

Controlling shareholders have no fiduciary responsibility to minority shareholders.

Accepted Answer

Controlling shareholders have a fiduciary responsibility to act in the best interest of all shareholders, including minority shareholders, and must not use their power to unfairly benefit themselves at the expense of others. This responsibility is often enforced through legal and regulatory frameworks.

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.

Accepted Answer

In a derivative lawsuit, proceeds are awarded to the corporation, but in a direct shareholder lawsuit, proceeds can be awarded directly to the shareholders.

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?

Accepted Answer

Both shareholders who own at least 10 percent of a company's stock and the board of directors have the right to call a special meeting under the Model Act.

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.

Accepted Answer

The officers of large corporations often have significant influence over the nomination and election of directors, as they often hold a large portion of the company's voting shares and may have strong relationships with other influential shareholders. This influence can allow them to shape the board of directors to better align with their interests and goals for the company.

Quiz 35: Shareholders