Chapter 19.2 Study Guide Questions

Individual corporate directors ___1.___ have the ability, as agents of the corporation, to bind the corporation.

1. Do not

Directors and officers have a duty to act ___1.___, to exercise the care that a(n) ___2.___ person would exercise in similar circumstances, and to do what the director or officer believes is in the ___3.___of the corporation.

1. In good faith 2. Ordinarily prudent 3. Best Interest

Directors are hired by the shareholders through an interview process.

False

Officers and directors have a special relationship with the corporation and its shareholders and are called:

Fiduciaries.

Corporate officers are hired by the directors.

True

The business judgment rule states that directors and officers:

Are immune from liability for bad business judgments so long as they exercised reasonable care.

Directors and officers may be liable for the actions of corporate employees under their supervision as well as for their own torts and crimes.

True

When a corporation enters into a contract or engages in business with another corporation in which one of the board members has a personal interest, that board member must fully ___1.___ the conflict and ___2.___ voting.

1. Disclose 2. Abstain from