Exam 37: Corporate Governance and the Sarbanes Oxley Act

The board of directors of Sunny Corporations votes 9-2 to require all future actions by the shareholders to be approved by a two-thirds majority.This action is:

A derivative lawsuit is one that a shareholder brings against an offending party on behalf of the corporation when the corporation fails to bring the lawsuit itself.

Voting agreements among shareholders of a corporation are usually considered to be void.

The officers of a corporation are responsible for overseeing the board of directors.

Shareholders may enter into an agreement that states that if a shareholder wants to sell his stock he must sell it to the corporation.

Which of the following statements is false?

Martin,Martina,and Melvin are shareholders of Random Corporation.They each hold several hundred of the 5,000 outstanding shares.The three enter into an agreement that they will always vote against any attorney in a board of director's election and vote against any plans to expand the corporation's business overseas.This agreement is:

Cumulative voting gives a minority shareholder a better chance to elect someone to the board of directors.

Stableblades,Inc.holds a patent on an inline skate that differs from others on the market in that it has two rows of wheels.These skates are not quite as fast as regular inline skates,but are much more stable and are designed for older persons and persons who skate only occasionally.Mary is a shareholder of Stableblades.Stableblades has been selling this product for several years,and there are no similar products on the market.Twice in the past couple of years,Stableblades threatened litigation over patent infringement,successfully preventing competitors from introducing similar products.Recently,another competitor actually introduced a similar product that Mary believes infringes on Stableblades' patent.Mary has tried to get the board to take action,but they refuse to do so.Mary suspects that some of the board members would like to be elected to the board of the competitor some day,and this is the reason for their inaction.Explain Mary's options in this situation.

Generally,a corporate director is liable for mistakes in judgment.

Mary is the president of Heavy Metals Corporation.The appropriate state law provides that corporations cannot invest in speculative uranium stock.Mary has Heavy Metals invest in some speculative uranium stock.Mary's action breaches her duty of:

The term of a director's office expires at the next annual shareholder's meeting following his or her election,unless terms are staggered.

Which of the following best describes buy-and-sell agreements among shareholders of a corporation?

Corporations are required to hold shareholders' meetings at least:

Sue owns 500 shares of stock in a company that has 10,000 outstanding shares.The company declares a stock dividend of 10%.How many stock dividend shares will Sue receive?

When relying on a report prepared by a professional,corporate officers and directors have a duty to use care and diligence in relying on its accuracy.

Betty is a director of the Good Thunder Corporation.Good Thunder wants to buy a tract of land on which to build a new factory.Betty owns such a tract of land,and sells it to Good Thunder without disclosing that she owns the land.Betty is paid the fair market value of the land.Betty's action is best described as which of the following?

Tim owns 30 of the 10,000 shares in Heron Corporation.There was a special shareholders' meeting held recently for which Tim received notice 4 days in advance.Tim could not attend.One agenda item that Tim favored was defeated by a vote of 7,050 to 2,423.Tim can:

The articles of incorporation can provide that existing shareholders may buy new issues of stock in the same proportion as their current holdings.This is done to allow the current stockholders to keep the same voting and dividend rights they had before the new issue.This right is known as a right of:

On the board of directors of a corporation,an outside director is a director who is not also an officer of the corporation.