Chapter 30

A quorum consists of: a. the number of voters who must agree to a revision before corporate bylaws may be changed or otherwise amended. b. 66 percent of all directors. c. 51 percent of all shareholders. d. the minimum number of members of a decision-making body that must be present before business may be transacted.

the minimum number of members of a decision-making body that must be present before busies may be transacted

The initial board of directors of a corporation is appointed by the: a. officers. b. members. c. incorporators. d. shareholders.

incorporators

Based on its poor financial performance in the past year, Gillian Corporation decides against paying dividends. That decision was made by Gillian's: a. external auditor. b. board of directors. c. shareholders. d. accounting department.

board of directors

An officer may be removed from office: a. by the other officers at any time for any reason. b. by the directors at any time for any reason. c. by the directors but only for cause. d. by the shareholders but only for cause.

by the directors at any time for any reason

A director can be removed from the position if the term expires and the director is not reelected by the shareholders or: a. by the officers of the company but only for cause. b. by the shareholders but only for cause. c. by the other directors for any reason. d. by the shareholders for any reason.

by the shareholders but only for cause

Directors' duty of care includes: a. carrying out their responsibilities in an informed, business-like manner. b. subordinating their personal interests to the corporation's welfare. c. refraining from using confidential corporate information for personal advantage. d. being faithful to their obligations and duties.

carrying out their responsibilities in an informed, business-like manner

If a director has expenses related to being sued as a director of the corporation, the corporation has a duty to a. give notice of termination to the director. b. initiate a shareholder derivative suit. c. inspect the court records. d. indemnify the director.

indemnify the director

Salvatore, a director for Bernard Incorporated, has been hiring companies owned by families and friends as suppliers of Bernard and paying them grossly inflated prices, causing Bernard to suffer financially. Bernard's shareholders: a. must win a civil suit against Salvatore before he can be removed. b. must defer to Bernard's board for any action taken against Salvatore. c. may remove Salvatore for cause. d. may only remove Salvatore if it's allowed in the company's bylaws.

May remove Salvatore for cause

The business judgment rule states that: a. directors and officers are immune from liability for exercising poor business judgment in certain circumstances. b. directors may never be held liable for corporate harms or losses, as long as they have attended board meetings and agreed to corporate actions. c. shareholders may be personally liable for the negligent torts committed by the directors of a corporation if these torts are the result of a lack of oversight. d. directors and officers are never immune from liability for exercising poor business judgment, regardless of the circumstances.

directors and officers are immune from liability for exercising poor business judgment in certain circumstances

Mark is a director of Bromley Corp. Mark owns a printing company, and Bromley needs to have a book printed. If Mark contracts with Bromley to print the book, he must: a. resign from the board if anyone questions the conflict of interest. b. do nothing special; the contract is valid. c. fully disclose his interest to the other board members and abstain from voting on the matter. d. never enter into a contract like this.

fully disclose his interest to the other board members and abstain from voting on the matter

Juan is a director of Poder Company. He has a particular interest in environmentally-friendly processes. The other directors want to meet without Juan to have a discussion about some possible process changes without a need to discuss the environmental impacts yet so they schedule a phone conference without telling him. This likely: a. is a violation of Juan's right to indemnification. b. is a violation of Juan's right to participation. c. is a violation of Juan's right of inspection. d. is not a violation of any of Juan's rights.

is a violation of Juan's right to participation

The Sarbanes-Oxley Act of 2002 requires officers to: a. follow proper hiring procedures and do background checks on employees. b. disclose any potential torts or crimes committed by employees under their supervision. c. maintain effective controls to ensure financial reporting is accurate. d. fully disclose any potential harm to consumers of the corporation's products.

maintain effective controls to ensure financial reporting is accurate

The duty of loyalty for directors requires that a director: a. quit all other professional positions and only work for the corporation. b. also serve as an officer of the corporation to ensure consistency. c. make a full disclosure of any potential conflicts of interest. d. carry out responsibilities in an informed, business-like manner

make a full disclosure of any potential conflicts of interest

The bylaws of Landry, Inc., state that business can only be transacted at a board meeting if 50 percent or more of the members are present. If three of its ten members are present at the meeting, two are conferenced in on the Web, and one is on the telephone, does a quorum exist? a. the member on the phone can be considered present, but there is no quorum because the Web conferencing is not allowed. b. most states would say that a quorum exists. c. a quorum exists due to the video conferencing, though the member on the phone is not counted. d. there is no quorum because all members must be physically present to be counted.

most states would say that a quorum exists

Genevieve is a member of the board of directors and the chief financial officer of The Shoe Fits. Under the duty of due care that she owes the corporation, Genevieve does not need to: a. subordinate her personal interests to the welfare of the corporation. b. attend board meetings and oversee the corporation's employees and other officers. c. attend presentations and make a careful study of business choices before making decisions. d. oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services.

oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services

Kate is the president of TheatreDepot Inc. As an officer, her role is to: a. declare dividends. b. determine the appropriate salaries for the officers. c. oversee the day-to-day operations of the business. d. make decisions regarding issuing stocks or bonds

oversee the day-to-day operations of the business

Paul is an officer of Lumberjack Corp. His employment at the company is under the direction of: a. state statute. b. the other officers of Lumberjack Corp. c. the shareholders of Lumberjack Corp. d. the directors of Lumberjack Corp.

the directors of Lumberjack Corp

A board of directors does not have responsibility over: a. financial decisions, such as issuing shares of stock or bonds. b. the election and removal of members of the board. c. the declaration and payment of corporate dividends. d. the appointment, supervision, and removal of corporate officers.

the election and removal of members of the board

The officers of Stamford Corp. decide to acquire the floundering Cirrus, Inc. They think that the company will be a good addition and the product line will fare better under their leadership than it has at Cirrus. The board agrees, and the acquisition is made. However, the Cirrus line proves to be a drain on Stamford and ends up losing money for the company. Stamford shareholders: a. can recover their personal losses by bringing a derivative suit. b. will likely have no recourse under the business judgment rule. c. can take action against Stamford for breach of care. d. can take action against Stamford for breach of loyalty.

will likely have no recourse under the business judgment rule

Carmen is the Vice President of Human Relations at Tech Corp. She is responsible for overseeing the hiring process, as well as directly hiring staff to deal with payroll, staff development, and similar HR functions. Carmen has a friend named Jody who referred Jody's friend Jess for a position. Carmen hired Jess as a favor to Jody and did not complete a background check. A few weeks later, Jess punched another employee when they had a small argument. If Carmen had run a background check, she would have found that Jess had been in jail at least two times for punching people. In this situation, if the employee Jess punched sued Carmen, she: a. would not be liable because she did not commit any tort herself. b. would be liable because an officer is always responsible for the torts and crimes of their employees. c. would not be liable because she hired Jess as part of her job. d. would be liable because failing to conduct the background check would be considered negligence.

would be liable because failing to conduct the background check would be considered negligence