Business Law II: Worksheet 34.1

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

Directors are hired by the shareholders through an interview process.

False

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

- executive committee - audit committee

Corporate officers are hired by the directors.

True

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

The business judgment rule states that directors and officers:

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

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

fiduciaries

With respect to officers, most corporations have a _________, one or more vice-presidents, a secretary, and a ________.

president treasurer

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

- right to indemnification - right to participation - right of inspection

Quorum

the directors required to make a decision or take official action

Inside directors

the directors who also are officers of the corporation

Outside directors

the directors who do not hold management positions at the corporation

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 ______ the conflict and ______ voting

disclose abstain from

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

do not