Question 1

Management Consultants,Inc.,has a large number of directors.The board can delegate certain tasks to

Accepted Answer

Committees of directors can be created to handle specific tasks or areas of responsibility. This allows the board to delegate responsibilities and focus on strategic planning and decision-making. Shareholders are not typically involved in day-to-day management tasks, and incorporators are only involved in the initial formation of the company. The board cannot simply ignore tasks that need to be done, so delegating to committees is the best option.

Question 2

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

Accepted Answer

Honi's opposition to the tender offer that is in the company's best interest could be a breach of the duty of loyalty, which requires a director to act in the best interest of the company and its shareholders, rather than their own personal interests or gains. By opposing the tender offer simply to protect her own position as a director, Honi would be prioritizing her own interests over those of the company and shareholders, which could be a breach of her duty of loyalty.

Question 3

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

Accepted Answer

Fiona's ownership of the stock is not affected by the loss of the certificate. She can contact the issuer of the certificate to request a replacement or to confirm her ownership of the share.

Question 4

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

Accepted Answer

Shareholders typically have the right to approve major corporate decisions such as mergers, which can significantly impact the company's structure and value.

Question 5

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

Accepted Answer

Directors have a fiduciary duty to act in the best interests of the corporation and its shareholders, which means they cannot prioritize their personal interests over the corporation's welfare.

Question 6

Etta is a director of Fab Stuff Corporation.Without informing Fab,Etta goes into business with GR8 Things,Inc.,in competition with Fab.Etta is liable for breach of

Accepted Answer

Etta has breached her duty of loyalty as a director by engaging in competition with her own company without informing them. This is a violation of her obligation to act in the best interests of her company and prioritize their interests over her own.

Question 7

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

Accepted Answer

Shannon is not liable for breach of duty because the business judgment rule protects officers from liability for decisions made in good faith that result in poor outcomes.

Question 8

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

Accepted Answer

Corporate officers are typically involved in the day-to-day operations of a company, overseeing various aspects of its management and functioning.

Question 9

Regina is a director of Shale Oil,Inc.As a director,with respect to the corporation,Regina is

Accepted Answer

As a director, Regina has a fiduciary duty to act in the best interest of the corporation and its shareholders. This means that she must exercise her powers and responsibilities with care, loyalty, and good faith. She is not an incorporator (who initiates the process of forming a corporation), an officer (who manages the day-to-day operations), or an employee (who works for the corporation for compensation).

Question 10

Because stock is intangible personal property,a stockholder's ownership of the stock

Accepted Answer

A stockholder's ownership of the stock exists independently of the stock certificate itself. While a stock certificate is a physical proof of ownership, it is not necessary for stockholders to possess the actual certificate in order to own the stock. Ownership of stock is recorded electronically by the issuing company or a transfer agent, and stockholders can transfer ownership by electronically transferring shares without the need for a physical certificate.

Question 11

Rafi,a director of Super Service Station Corporation,does not attend a board meeting for three years.During that time,Twyla,Super's president,makes improper loans that cost the company $100,000.Rafi is most likely

Accepted Answer

As a director, Rafi has a duty of care and loyalty to the company. By not attending board meetings for three years, Rafi may be considered neglectful of his duty of care, and therefore liable for any losses suffered by the company. The fact that Twyla made improper loans during this time suggests a breach of the duty of loyalty and potential mismanagement, for which Rafi may also be held liable as a director.

Question 12

Rosa and Sean are shareholders of Tech,Inc.Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is

Accepted Answer

Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is a proxy. A proxy is a document authorizing someone else to vote on behalf of the shareholder who is unable or unwilling to attend the meeting.

Question 13

Cara and Dru are officers of EZ Trucking Corporation.As corporate officers,the rights of Cara and Dru are

Accepted Answer

The rights of corporate officers like Cara and Dru are typically determined by their employment contracts, which outline their roles, responsibilities, and rights within the corporation.

Question 14

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

Accepted Answer

Cumulative voting allows minority shareholders to have a greater chance of electing a director of their choice by pooling their votes together. This helps in ensuring better representation of their interests on the board.

Question 15

Coast-to-Coast Distribution,Inc.,is a direct-mail distribution company.Like most corporations,Coast-to-Coast's employees include its

Accepted Answer

Officers are employees of a corporation who manage the day-to-day operations.

Question 16

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

Accepted Answer

Mickey's failure to read details and approve transactions without proper evaluation shows a breach of the duty of care. As a director, Mickey has a fiduciary duty to exercise reasonable care, skill, and diligence in managing the affairs of the company, which has been violated here. However, Mickey's actions do not necessarily violate the duty of loyalty, which involves acting in the best interest of the company and avoiding conflicts of interest. This situation may not meet the requirements for violation of the business judgment rule, which protects directors from liability for decisions made in good faith and with reasonable care.

Question 17

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

Accepted Answer

In cumulative voting, the number of votes a shareholder has is determined by multiplying the number of directors to be elected by the total number of voting shares that the shareholder holds. Therefore, Mieko's votes are determined by multiplying the number of directors to be elected by the total number of voting shares that Mieko holds.

Question 18

Corporate business matters are presented at a shareholders' meeting in the form of

Accepted Answer

Resolutions are proposals or decisions put to a vote at a shareholders' meeting in order to approve or reject a corporate business matter. Articles of incorporation, proxies, and bylaws are also important corporate documents, but they do not necessarily pertain specifically to matters discussed at a shareholders' meeting.

Question 19

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 stock.Lewis is most likely liable for breach of

Accepted Answer

Lewis is a director of Mines & Refineries, Inc. and used information that is not available to the public to make a profit trading in Mines & Refineries stock. This is a breach of the duty of loyalty, which requires directors to act in the best interests of the corporation and its shareholders.

Question 20

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

Accepted Answer

Under the standard of due care, directors are expected to make reasonable decisions that are informed and made in good faith. This means that while directors are not expected to be perfect or infallible, they must act with care and diligence in carrying out their fiduciary duties to the corporation and its stakeholders. The other options, including indefensible and unquestionable, are not consistent with the standard of due care.

Quiz 31: Management and Ownership of a Corporation