Chapter 34: Corporate Directors, Officers and Shareholders

board of directors

_________________________ conducts business by holding formal meetings with recorded minutes

stock certificate

a certificate issued by a corporation evidencing the ownership of a specified number of shares in a corporation

for cause

a director can be removed _______________-for failing to perform a required duty, either as specified in the articles or bylaws or by shareholder action

outside director

a person on the board of directors who does not hold a management position at the corporation

inside director

a person on the board of directors who is also an officer of the corporation

stock options

a right to buy a given number of shares of stock at a set price, usually with in a specified time period

shareholders derivative suit

a suit brought by a share holder to enforce a corporate cause of action against a third person

preemptive rights

allows each shareholder to maintain their proportionate control, voting power, and financial interest in the corporation

resolutions

corporate business matters are presented in the form of _________________ which shareholders vote to approve or disapprove

fiduciary

directors and officers _________________ duty requires them to make full disclosure of any potential conflicts of interest that might arise in any corporate transaction

reasonable supervision

directors and officers have the duty to exercise __________________________

informed and reasonable decisions

directors and officers have the duty to make __________________________ by conducting a reasonable investigation of the relevant situation before making a decision

personally liable

directors and officers may be held ______________________ for a number of statutes such as those that protect the environment and consumers

due care

directors and officers must exercise _______________ in performing their duties

negligence

directors and officers whose failure to exercise due care results in harm to either the corporation or shareholders can be held liable for _______________________

executive committee

handles interim management decisions between board meetings, is limited to making decisions about ordinary business matters and does not have the power to declare dividends, amend bylaws or authorize the issuance of stock

indemnification

if a director becomes involved in litigation by virtue of his or her actions, the director may also have the right to _______________________ for legal costs, fees and damages incurred

shareholders derivative suit

if the directors fail to file a lawsuit against a third party that has harmed the corporation or shareholders, the shareholders can file a ________________________-

certified copy of the resolutions

if you are dealing with a corporation and you want to be certain that the corporation is authorized to enter into a proposed transaction, demand a __________________________ of the board of directors approving the transactions and authorizing and officer or officers of the corporation to sign the necessary documents on behalf of the corporation

chief corporate officers

in many corporations, directors are also _____________________ and receive compensation in their managerial positions

audit committee

is responsible for the selection, compensation, and oversight of the independent public accountants that audit the firms financial records

shareholders

must approve fundamental changes affecting the corporation before the changes can be implemented

stock options

one way a corporation can align the financial interests of officers and shareholders

close corporations

preemptive rights are most important in ____________________ because each shareholder owns a relatively small number of shares but controls a substantial interest in the corporation

inspection rights

shareholders in a corporation enjoy both common law and statutory _____________________________

annually

shareholders meetings must occur at least ______________

articles, bylaws

subject to statutory limitations, the number of directors is set forth in the corporations _________________ & ________________

compensation committee

the _________________ has the duty to set the compensation to be paid to the officers of the company

audit committee

the ____________________ is responsible for reviewing the company's internal financial controls to ensure that there are systems and procedures in place to discover and remedy any financial irregularities before they reach a crisis stage

audit committee

the ____________________ must produce an annual report that is included in a publicly traded companys filings with the SEC reviewing all of these issues and how the committee and the company satisfied these requirements

rules of exchanges

the _____________________ provide that the chairman of the audit committee must have a financial background and be able to read and to interpret properly basic accounting documents such as a balance sheet, income statement, and profit and loss statement

business judgement rule

the _______________________ is a rule under which courts will not hold corporate officers and directors liable for honors mistakes of judgement and bad business decisions that were made in good faith

right of inspection

the _______________________ means that each director can access the corporations books and records, facilities and premises

right to participation

the __________________________ means that directors are entitled to participate in all board of directors meetings and to be notified of these meetings

committees of directors

the boards of large publicly held corporations typically create _______________________ and delegate certain tasks to them

loyalty

the duty of ____________________ requires directors and officers to subordinate their personal interests to the welfare of the corporation

transfer rights

the law generally recognizes ____________________ of one person to another unless there are valid restrictions such as in the case of with close corporations

quorum

the number of members of a decision making body that must be present for a meeting to take place

audit committee

the responsibilities of the ___________________ include to work with the company's internal and external auditors and to ensure that the companys financial statements are truthful and accurate and maintained in accordance with GAAP

preemptive rights

the right of a shareholder in a corporation to have the first opportunity to purchase a new issue of that corporations stock in proportion to the amount of stock already owned by the shareholder

employment contracts

the rights of corporate officers are defined by their ____________________________

audit committee

the sarbanes oxley act requires all publicly held corporations to have an _________________________

good faith

the standard of due care is usually ______________________

capitalization of the corporation

the types and authorized number of debt and equity securities the corporation is authorized to issue

cumulative voting

this voting method is designed to allow minority shareholders to be represented on the board of directors

proxy

when a shareholder formally authorizes another to serve as his or her agent and vote on his or her shares in a certain matter

shareholder proposal

when shareholders want to change a company policy, they can put up their idea for a shareholder vote. They can do this by submitting a ______________________ to the board of directors for it to be included in the proxy materials.

bylaws

will include the authorized officers of the corporation and a brief description of their duties and responsibilities, the procedures and notice requirements for the annual meeting of shareholders, special shareholder meetings, authorized powers of the officers of the corporation

cumulative voting

with _____________________ each shareholder is entitled to a total number of votes equal to the number of board members to be selected multiplied by the number of voting shares the shareholder owns