18.3 Directors and officers and shareholders

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

do not

Shareholders must approve any corporate decision that would cost more than $10,000.

false

The board of directors holds meetings with recorded minutes, generally on predetermined dates. They may hold special meetings with sent to all directors. In most states, directors have to participate in person. Each director at the meeting has vote(s), and directors who miss the meeting have vote(s).

formal notice do not one no

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

in good faith ordinarily prudent best interest

One of the hallmarks of the corporate form is that shareholders may lose their investment in the corporation but no more than that.

true

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

fiduciaries

If a corporation issues stock for less than the fair market value, that stock is called:

watered stock

Select the two most common committees formed by large boards of publicly traded companies.

Audit committee Executive committee

Select the three main rights that directors have in order to properly function.

Right to participation Right of inspection Right to indemnification

When a company distributes a portion of its income or profits in cash, property or stock to its shareholders in proportion to their shares, it is called:

a dividend

Ordinarily, are entitled to vote at an annual corporate meeting.

all persons who appear on the corporations records as owners

The reason that most states either permit or require cumulative voting when electing directors is to:

allow minority shareholders a chance at electing a director.

The business judgment rule states that directors and officers:

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

A director or officer may violate the duty of loyalty by directly the corporation, by or stealing a corporate opportunity, by having a of interest, by engaging in trading, by authorizing an action that is to minority shareholders or by selling the corporation.

competing with usurping conflict insider detrimental control over

When a single shareholder owns sufficient shares to exercise control over the corporation, that shareholder is called a shareholder and owes duties to the minority shareholders.

de facto majority fiduciary

When a company is harmed, the board of directors can sue on behalf of the corporation. If they do not, the shareholders may bring a(n) action. Before filing suit, the shareholders must make a(n) demand of the board to do so. If the board does not take action within days, the shareholders can file suit. A court may dismiss the case if the majority of directors or a(n) panel determines it is not in the best interest of the corporation.

derivative written 90 independent

A corporation may give current shareholders rights, or the rights to purchase a share of any new issue of stock. Generally there a time limit on the ability to exercise this right. The purpose of this right is to allow shareholders to their proportionate control in the company.

preemptive prorated is maintain

Because shareholders with a very small percentage of shares may not be able to travel to annual meetings, the law allows them to appoint someone else to vote their shares using a authorization form. Management often these.

proxy solicits

In order for shareholders to exercise control, a must be present, either in person or through proxies.

quorum

inside directors

the directors who also are officers of the corporation

outside directors

the directors who do not hold management positions at the corporation

quorum of directors

the minimum number of directors requires to make a decision or take official action

Before a shareholder's meeting, a group of shareholders can create a shareholder voting agreement by agreeing in writing to vote their shares together in a specified manner.

true

If a board of directors declares a dividend to "pay back" investors but that dividend would cause them to have to miss paying several bills as they become due, the members of that board will be personally responsible for any loss to the corporation.

true