Chapter 34: Corporate Directors, Officers and Shareholders
board of directors
_________________________ conducts business by holding formal meetings with recorded minutes
stock certificate
a certificate issued by a corporation evidencing the ownership of a specified number of shares in a corporation
for cause
a director can be removed _______________-for failing to perform a required duty, either as specified in the articles or bylaws or by shareholder action
outside director
a person on the board of directors who does not hold a management position at the corporation
inside director
a person on the board of directors who is also an officer of the corporation
stock options
a right to buy a given number of shares of stock at a set price, usually with in a specified time period
shareholders derivative suit
a suit brought by a share holder to enforce a corporate cause of action against a third person
preemptive rights
allows each shareholder to maintain their proportionate control, voting power, and financial interest in the corporation
resolutions
corporate business matters are presented in the form of _________________ which shareholders vote to approve or disapprove
fiduciary
directors and officers _________________ duty requires them to make full disclosure of any potential conflicts of interest that might arise in any corporate transaction
reasonable supervision
directors and officers have the duty to exercise __________________________
informed and reasonable decisions
directors and officers have the duty to make __________________________ by conducting a reasonable investigation of the relevant situation before making a decision
personally liable
directors and officers may be held ______________________ for a number of statutes such as those that protect the environment and consumers
due care
directors and officers must exercise _______________ in performing their duties
negligence
directors and officers whose failure to exercise due care results in harm to either the corporation or shareholders can be held liable for _______________________
executive committee
handles interim management decisions between board meetings, is limited to making decisions about ordinary business matters and does not have the power to declare dividends, amend bylaws or authorize the issuance of stock
indemnification
if a director becomes involved in litigation by virtue of his or her actions, the director may also have the right to _______________________ for legal costs, fees and damages incurred
shareholders derivative suit
if the directors fail to file a lawsuit against a third party that has harmed the corporation or shareholders, the shareholders can file a ________________________-
certified copy of the resolutions
if you are dealing with a corporation and you want to be certain that the corporation is authorized to enter into a proposed transaction, demand a __________________________ of the board of directors approving the transactions and authorizing and officer or officers of the corporation to sign the necessary documents on behalf of the corporation
chief corporate officers
in many corporations, directors are also _____________________ and receive compensation in their managerial positions
audit committee
is responsible for the selection, compensation, and oversight of the independent public accountants that audit the firms financial records
shareholders
must approve fundamental changes affecting the corporation before the changes can be implemented
stock options
one way a corporation can align the financial interests of officers and shareholders
close corporations
preemptive rights are most important in ____________________ because each shareholder owns a relatively small number of shares but controls a substantial interest in the corporation
inspection rights
shareholders in a corporation enjoy both common law and statutory _____________________________
annually
shareholders meetings must occur at least ______________
articles, bylaws
subject to statutory limitations, the number of directors is set forth in the corporations _________________ & ________________
compensation committee
the _________________ has the duty to set the compensation to be paid to the officers of the company
audit committee
the ____________________ is responsible for reviewing the company's internal financial controls to ensure that there are systems and procedures in place to discover and remedy any financial irregularities before they reach a crisis stage
audit committee
the ____________________ must produce an annual report that is included in a publicly traded companys filings with the SEC reviewing all of these issues and how the committee and the company satisfied these requirements
rules of exchanges
the _____________________ provide that the chairman of the audit committee must have a financial background and be able to read and to interpret properly basic accounting documents such as a balance sheet, income statement, and profit and loss statement
business judgement rule
the _______________________ is a rule under which courts will not hold corporate officers and directors liable for honors mistakes of judgement and bad business decisions that were made in good faith
right of inspection
the _______________________ means that each director can access the corporations books and records, facilities and premises
right to participation
the __________________________ means that directors are entitled to participate in all board of directors meetings and to be notified of these meetings
committees of directors
the boards of large publicly held corporations typically create _______________________ and delegate certain tasks to them
loyalty
the duty of ____________________ requires directors and officers to subordinate their personal interests to the welfare of the corporation
transfer rights
the law generally recognizes ____________________ of one person to another unless there are valid restrictions such as in the case of with close corporations
quorum
the number of members of a decision making body that must be present for a meeting to take place
audit committee
the responsibilities of the ___________________ include to work with the company's internal and external auditors and to ensure that the companys financial statements are truthful and accurate and maintained in accordance with GAAP
preemptive rights
the right of a shareholder in a corporation to have the first opportunity to purchase a new issue of that corporations stock in proportion to the amount of stock already owned by the shareholder
employment contracts
the rights of corporate officers are defined by their ____________________________
audit committee
the sarbanes oxley act requires all publicly held corporations to have an _________________________
good faith
the standard of due care is usually ______________________
capitalization of the corporation
the types and authorized number of debt and equity securities the corporation is authorized to issue
cumulative voting
this voting method is designed to allow minority shareholders to be represented on the board of directors
proxy
when a shareholder formally authorizes another to serve as his or her agent and vote on his or her shares in a certain matter
shareholder proposal
when shareholders want to change a company policy, they can put up their idea for a shareholder vote. They can do this by submitting a ______________________ to the board of directors for it to be included in the proxy materials.
bylaws
will include the authorized officers of the corporation and a brief description of their duties and responsibilities, the procedures and notice requirements for the annual meeting of shareholders, special shareholder meetings, authorized powers of the officers of the corporation
cumulative voting
with _____________________ each shareholder is entitled to a total number of votes equal to the number of board members to be selected multiplied by the number of voting shares the shareholder owns