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Exam 35: Management Structure

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Question 31

Multiple Choice

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The Revised Act and the majority of states hold that the officers' and directors' test of the duty of diligence requires a director or officer to discharge her duties:

A) in good faith.
B) with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
C) in a manner she reasonably believes to be in the best interests of the corporation.
D) All of these.

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Question 32

Multiple Choice

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All of the following would constitute a "fundamental change" to the corporation EXCEPT:

A) an amendment to the articles of incorporation.
B) a merger.
C) a stock dividend.
D) selling off 60% of the business assets not in the regular course of business.

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Question 33

True/False

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The Sarbanes-Oxley Act was passed in 2002 to seek to prevent corporate scandals by increasing corporate responsibility, creating new financial disclosure requirements, creating new criminal offenses, and creating an Accounting Oversight Board.

Zeron Corporation stock may be summarized as follows: 100,000 authorized 90,000 issued 75,000 outstanding 15,000 treasury stock How many shares or proxies will have to be present for a quorum (assuming no special provision and that the Revised Act is not in effect) ?

Under the RMBCA, if a quorum exists, a shareholder action such as the election of directors is approved if the votes cast for the action exceed the votes cast against it.

A proxy is revocable to the same extent as an agency.

Who usually determines the compensation of officers and directors? What are some of the executive compensations available?

Officers who trade on inside information must return their profits to the corporation.

An officer cannot be removed without the shareholders voting to do so.

Gerhardt is the president of the Speedway Bicycle Company. He also serves as a director of the Flexible Tire Company. It occurs to Gerhardt that both companies could benefit from a contract in which Flexible agrees to supply Speedway with tires for its bicycles. If Gerhardt wishes to negotiate a contract between Speedway and Flexible, which of the following is correct?

During the past twenty years or so, inside directors' number and influence in most large corporations have increased dramatically.

Assuming there are no provisions in the corporation's articles of incorporation or bylaws regarding quorum requirements, if there are 13 total directors of General Gonzo Corporation and the minimum number of directors are present to transact business, how many votes normally would be necessary for those present to act as a board?

Directors usually may vote by proxy when they are not able to be present for a meeting.

Cumulative voting is permitted so the majority of shareholders can keep control of the board of directors.

Which of the following would be likely to result in liability to a director of a textile company? The director:

A voting trust does not permit a concentration of corporate control in one person.

Jack has been on the board of his brother's company for three years but has never attended a board meeting. He may be liable for failing to act.

The board of directors generally manages the day-to-day affairs of the company.

Management can be offered shares of the corporation at favorable prices if other shareholders are excluded from that offer.

Assume that 12,000 shares are represented at a shareholder meeting and a quorum exists. How many votes are normally necessary to carry a motion?