Homework: Module 3 Practice Quiz: Corporate Governance

The​ Sarbanes-Oxley Act requires CEO and CFO certification for​ ________.

both annual and quarterly reports The CEO and chief financial officer​ (CFO) of a public company must file a statement accompanying each annual and quarterly report called the CEO and CFO certification.

The board of directors authorizes an action to be taken on behalf of the corporation by adopting​ ________.

resolutions The board of directors authorizes actions to be taken on behalf of the corporation by adopting resolutions at board of​ directors' meetings.

Unless otherwise required by a​ corporation's articles of incorporation or by corporate​ law, voting for the election of directors is by the​ _____ voting method.

straight

A federal statute that establishes rules to improve corporate​ governance, prevent​ fraud, and add transparency is the​ ________.

​Sarbanes-Oxley Act

Which of the following is NOT an element that must be shown to prove usurping a corporate​ opportunity? A. The opportunity was presented to the director or officer in his or her corporate capacity. B. The corporation has the financial ability to take advantage of the opportunity. C. The corporate officer or director took the corporate opportunity for himself or hersel D. The opportunity is related to or connected with the​ corporation's current or proposed business. E. The opportunity is accompanied by demonstrated proof of profitability.

E. The opportunity is accompanied by demonstrated proof of profitability.

Shareholders hold meetings​ ________.

annually The annual​ shareholders' meeting is a meeting of the shareholders of a corporation that must be held by the corporation to elect directors and to vote on other matters. Next Question

According to the​ _____ rule, directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

business judgment

Which of the following elements could be used to prove​ usurping? A. the opportunity was presented directly to the Board of Directors by one of the directors B. the corporation has the financial ability to take advantage of the opportunity Your answer is correct.C. the corporate officer took the opportunity on behalf of the​ company, for the company D. the opportunity was not presented to the director or officer is his or her corporate capacity E. the opportunity is not related to the​ corporation's current business plan

B. the corporation has the financial ability to take advantage of the opportunity

Which of the following is an INCORRECT statement regarding corporate voting​ requirements? A. The affirmative vote of the majority of the​ non-voting shares represented at a​ shareholders' meeting constitutes an act of the shareholders for actions other than for the election of directors. Your answer is correct.B. The corporation must prepare a​ shareholders' list that contains the names and addresses of the shareholders as of the record date and the class and number of shares owned by each shareholder. C. The​ shareholders' list must be available for inspection at the​ corporation's main office. D. Once a quorum is​ present, the withdrawal of shares does not affect the quorum of the meeting. E. Unless otherwise provided in the articles of​ incorporation, if a majority of shares entitled to vote are represented at a meeting in person or by​ proxy, there is a quorum to hold the meeting.

a. The affirmative vote of the majority of the​ non-voting shares represented at a​ shareholders' meeting constitutes an act of the shareholders for actions other than for the election of directors.

The determination of whether or not​ Julie, the corporate​ director, has met her duty of care can be decided by the​ ________.

A business judgment rule is a rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

The goals of the​ Sarbanes-Oxley Act​ (SOX) of 2002 include all EXCEPT which of the​ following? A. replace independent corporate audits with internal audits B. eliminate conflicts of interest C. instill confidence in the public that management will run public companies in the best interests of all constituents D. instill confidence in investors that management will run public companies in the best interests of all constituents E. improve corporate governance rules

A. replace independent corporate audits with internal audits

Which of the following is NOT a major provision of the​ Sarbanes-Oxley Act? A. shareholder liability Your answer is correct.B. penalties for tampering with evidence C. reimbursement of bonuses D. prohibition on personal loans E. CEO certification

A. shareholder liability

An officer or director who breaches the duty of care is liable to​ ________.

An officer or director who breaches the duty of care is liable to both the corporation and the shareholders.

Which of the following companies entered into the largest settlement between the government and a private corporation in United States​ history?

Bank of America The​ $16.6 billion settlement referenced in the video is the largest settlement between the government and a private corporation in United States history.

​_____ voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates.

Cumulative

The piercing the corporate veil doctrine is also called the​ _____ doctrine.

alter ego

Which is often resorted to by unpaid creditors who are trying to collect from shareholders a debt owed by the​ corporation?

alter ego doctrine

​_____ shareholders' meetings are held to elect​ directors, choose an independent​ auditor, and take other actions.

annual

Which of the following is NOT an element that must be shown in order to prove the usurpation of a corporate​ opportunity? A. The corporate officer or director took the corporate opportunity for​ him- or herself. B. The opportunity was presented to the director or officer in his or her corporate capacity. C. The opportunity is related to or connected with the​ corporation's current or proposed business. D. The opportunity has a​ better-than-average chance of being profitable for the usurper. Your answer is correct.E. The corporation has the financial ability to take advantage of the opportunity.

d. The opportunity has a​ better-than-average chance of being profitable for the usurper.

The straight voting method is also referred to as​ _____ voting.

noncumulative

The articles of incorporation or the bylaws of a corporation can require a greater than majority of the shares to constitute a quorum of the vote of the shareholders. This is called a​ _____ voting requirement.

supramajority

Which of the following is an INCORRECT statement regarding a​ director's and an​ officer's duty of​ care? A. The officers of a corporation owe certain fiduciary duties when taking action on behalf of the corporation. B. The directors of a corporation owe certain fiduciary duties when making decisions on behalf of the corporation. C. To meet the duty of​ care, directors and officers must discharge their duties with the care that an ordinary prudent person in a like position would use under similar circumstances. D. To meet the duty of​ care, directors and officers must discharge their duties in good faith. E. The duty of obedience is a duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation.

E. The duty of obedience is a duty of corporate directors and officers to use care and diligence when acting on behalf of the corporation. The directors and officers of a corporation owe certain fiduciary duties when making decisions and taking action on behalf of the corporation. One such duty is the duty of care. The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation.

Which of the following is an INCORRECT statement regarding shareholder voting​ trusts? A. A voting trust agreement must be in writing. B. A voting trust may not authorize the trustee to vote the shares held by the trust at his or her discretion. Your answer is correct.C. A voting trust agreement cannot exceed ten years. D. A voting trust must be filed with the corporation and is open to inspection by shareholders of the corporation. E. A voting trust is an arrangement whereby shareholders transfer their stock certificates to a trustee.

B. A voting trust may not authorize the trustee to vote the shares held by the trust at his or her discretion.

Bank of America subsidiaries​ __________ were also implicated in this case for​ _________.

Merrill Lynch and​ Countrywide; financial fraud According to U.S. Department of Justice​ allegations, Merrill Lynch and Countrywide were also involved in the Bank of America financial fraud.

One of the goals of​ Sarbanes-Oxley is to​ ________.

One of the goals of​ Sarbanes-Oxley is to instill confidence in investors and the public that management will run public companies in the best interests of its constituents.

The doctrine of​ _____ is often used by unpaid creditors who are trying to collect from shareholders a debt owed by the corporation.

Piercing the corporate vei

​________ is a doctrine that says if a shareholder uses the corporate checking account to pay personal​ expenses, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the​ corporation's debts and obligations.

Piercing the corporate veil

​_____ rights give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

Preemptive The articles of incorporation can grant shareholders preemptive rights. Preemptive rights give existing shareholders the right to purchase new shares being issued by the corporation in proportion to their current ownership interests.

Lucy is a shareholder of a corporation and she has authorized Zach to vote her shares at the​ shareholder's meeting next Friday. Zach is serving as​ Lucy's ________.

Proxy A proxy is a​ shareholder's authorizing of another person to vote the​ shareholder's shares at the​ shareholders' meetings in the event of the​ shareholder's absence.

If the U.S. Department of Justice allegations are​ true, Bank of America directors and officers might have violated which of the following​ duties? A. care B. obedience C. loyalty D. usurpation of corporate opportunity E. selfdash-dealing

care The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation. To meet this duty of​ care, the directors and officers must discharge their​ duties: 1) in good​ faith; 2) with the care that an ordinary prudent person in a like position would use under similar​ circumstances; and​ 3) in a manner they reasonably believe to be in the best interests of the corporation.​ Arguably, issuing toxic securities based on inadequately securitized mortgage loans was not only contrary to the best interests of the​ investor, it was also contrary to good faith and the standard of care that an ordinarily prudent person in a similar situation would exercise.

Vasant is an officer of​ Big-Buy Corporation, which sells TVs. While still an officer for​ Big-Buy, Vasant opens his own store that sells TVs called​ Vasant's TVs. This would be an example of​ ________.

competing with the corporation

Suppose that after conducting considerable research and​ investigation, the directors of a major automobile company decide to produce large and expensive​ sport-utility vehicles​ (SUVs). Three years​ later, when the SUVs are introduced to the public for​ sale, few of them are sold because of the​ public's interest in buying​ smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. Because this was an honest mistake of judgment on the part of corporate​ management, their judgment is shielded by the​ _____ rule.

business judgment The business judgment rule is a rule that says directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment. Were it not for the protection afforded by the business judgment​ rule, many​ high-risk but socially desirable endeavors might not be undertaken.

If a corporation has been formed without sufficient​ capital, the courts will​ ________.

pierce the corporate veil

​A(n) _____ is a​ shareholders' authorizing of another person to vote the​ shareholder's shares at the​ shareholders' meetings in the event of the​ shareholder's absence.

proxy

The​ Sarbanes-Oxley Act was enacted in order to​ ________.

react to accounting and business scandals

Which of the following is an INCORRECT statement regarding a​ corporation's shareholders? A. Shareholders have the right to vote regarding fundamental changes in the corporation. B. Shareholders have the right to vote in an election of corporate directors. C. Shareholders have comprehensive management duties. D. Shareholders are not agents of the corporation. E. A​ corporation's shareholders own the corporation.

C. Shareholders have comprehensive management duties.

Which of the following is an INCORRECT statement regarding the duty of care of directors and officers of a​ corporation? A. To meet the duty of​ care, directors and officer must discharge their duties with the care that an ordinary prudent person in a like position would use under similar circumstances. B. To meet the duty of​ care, directors and officer must discharge their duties in a manner they reasonably believe to be in the best interests of the corporation. C. To meet the duty of​ care, directors and officer must discharge their duties in good faith. D. The duty of care is not a fiduciary duty. E. The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation.

The duty of care is not a fiduciary duty. The directors and officers of a corporation owe certain fiduciary duties when making decisions and taking actions on behalf of the corporation. Once such duty is the duty of care.

Which of the following is an INCORRECT statement regarding corporate voting​ requirements? A. The RMBCA permits corporations to grant more than one vote per share to some classes of stock and less than one vote per share to other classes of stock. B. At least one class of shares of stock of a corporation must have voting rights. C. Only shareholders who own stock as of a set date may vote at a​ shareholders' meeting. D. The record date is set forth in the​ corporation's articles of organization. Your answer is correct.E. The record date may not be more than 70 days before the​ shareholders' meeting.

The record date is set forth in the​ corporation's articles of organization.

Which government entity reached the​ $16.6 billion settlement with Bank of​ America?

United States Department of Justice

Which of the following is NOT an example of a breach of a​ director's or​ officer's duty of​ care? A. a​ director's or an​ officer's failure to keep adequately informed about corporate affairs B. a​ director's or an​ officer's failure to realize a profit for the corporation in any given calendar or fiscal year C. a​ director's or an​ officer's failure to make a reasonable investigation of a corporate matter D. a​ director's or an​ officer's failure to properly supervise a subordinate who causes a loss to the corporation through embezzlement and such E. a​ director's or an​ officer's failure to attend board meetings on a regular basis

a​ director's or an​ officer's failure to realize a profit for the corporation in any given calendar or fiscal year The failure of the corporation to generate a profit can result from a host of​ factors, and does not equate to a breach of a​ director's or​ officer's duty of care.

In the subject​ case, why did the Department of Justice pursue litigation against Bank of​ America?

because Bank of America was selling​ "toxic" mortgage securities backed by inadequately secured loans and violating mortgage fraud and consumer protection laws These toxic securities were a substantial contributing factor in the United States financial crisis of 2008.

After conducting considerable research and​ investigation, the directors of a major automobile company decide to produce large and expensive​ sport-utility vehicles​ (SUVs). Three years​ later, when the SUVs are introduced to the public for​ sale, few of them are sold because of the​ public's interest in buying​ smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. In this​ case, the directors are protected by the​ _____ rule.

business judgment

A right of first​ _____ is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else.

refusal

The difference between the duties of directors and officers is that ​ ________.

directors are responsible for policy decisions and officers manage the​ day-to-day operations of the corporation Directors are responsible for policy decisions and employ officers while officers manage the​ day-to-day operations of the corporation.

In meeting their duty of a care officers and directors must discharge their duties​ ________.

in good faith

Shareholders of a corporation have​ _______ liability for the debts and obligations of the corporation

limited

If a director or an officer breaches his or her duty of loyalty be taking a​ bribe, this would be known as​ ________.

making a secret profit

Cumulative voting gives a​ _____ shareholder a better opportunity to elect someone to the board of directors.

minority

The board of directors authorizes actions to be taken on behalf of the corporation by adopting​ _____ at board of​ directors' meetings.

resolutions A resolution is a vote taken by the board of directors of a corporation that authorizes certain actions to be taken on behalf of the corporation. Resolutions taken by the board of directors can include authorizing the corporation to enter into contracts and​ leases, employing an accountant or other​ professionals, appointing a new​ officer, declaring a​ dividend, authorizing a banking​ relationship, and issuing shares of stock. Next Question

Shareholders have the right to​ ________.

vote on matters such as the election of directors The only management duty shareholders have is the right to vote on matters such as the election of directors and the approval of fundamental changes in the corporation.

Which of the following is NOT a major provision of the​ Sarbanes-Oxley Act? A. ​"sliding-scale" cap on nominal damages Your answer is correct.B. CFO certification C. reimbursement of incentive pay D. bar from acting as a director E. bar from acting as an officer

​"sliding-scale" cap on nominal damages

If a​ shareholders' meeting is not held within either​ _____ months of the last annual meeting or​ _____ months after the end of the​ corporation's fiscal​ year, whichever is​ earlier, a shareholder may petition the court to order the meeting held.

​15; 6 Annual​ shareholders' meetings are held to elect​ directors, choose an independent​ auditor, and take other actions. If a​ shareholders' meeting is not held within either 15 months of the last annual meeting or 6 months after the end of the​ corporation's fiscal​ year, whichever is​ earlier, a shareholder may petition the court to order the meeting held. Next Question