Exam 37: Corporate Governance and the Sarbanes Oxley Act

Mr.Scott owns 1,000 shares of Jackson Corporation stock.Jackson is having the election for the board of directors.There are five directors to be elected.Mr.Scott comes to you for advice.Which of the following statements is false?

Regular,as well as special,meetings are provided for in the corporate bylaws.

Bart and Garth own 600 and 200 shares of the 1,000 outstanding shares of a corporation.Bart and Garth separately want to sell their shares.The shares were recently appraised at $240 per share,and there have been no significant changes or events affecting the value of the shares since the appraisal.Bart has found a buyer willing to pay $300 per share and Garth plans to sell his shares for $100 each.Assuming there is no express shareholders' agreement regarding sales of shares,what approvals must Bart and Garth obtain?

The document by which a shareholder grants another person the right to vote the shareholder's shares at a shareholders' meeting is called a:

Assuming there is no agreement on the issue,in order to transfer shares owned by a shareholder,the shareholder must obtain approval of:

The notice for which type(s)of shareholders' meetings must include the purpose of the meeting?

Dawn is a director of the Manello Corporation.Bert,a friend of Dawn's and an inventor,creates a new product.Bert wants Manello to handle the production and marketing of this new product,so Bert discusses his new invention with Dawn.Dawn thinks the new invention will be a huge success,but in order to maximize her personal income,Dawn suggests to Bert that she handle the manufacturing and marketing,leaving Manello out of it completely.Bert agrees.Discuss the propriety of Dawn's actions in this situation.Would the outcome be any different if Dawn were merely a shareholder owning 4 percent of Manello?

Bob is a shareholder in Gadgets,Inc.He owns 400 shares of the 10,000 shares outstanding.Gadgets has been in business for 14 years and Bob has been a shareholder for the entire time.Gadget has been profitable over the years,but has paid a dividend only once,and that was 8 years ago.The stock of Gadgets is not listed on a stock exchange.Gadgets has recently introduced a couple of unsuccessful products which have lost money.Bob wants to sue the board of directors for the losses caused by the unsuccessful products and to compel the payment of dividends.Discuss Bob's options and any other factors that might be relevant to the outcome of such a suit.What other options,if any,does Bob have?

How broad should the business judgment rule be in protecting officers and directors from liability for their actions? What is the purpose of the rule? What are the difficulties in its application?

Pam owns 800 of the 2,000 issued and outstanding shares of Antelope Corporation.There are five members of the board of directors,three of whom are up for election at a shareholders' meeting.If each share of stock is entitled to one vote,what is the maximum number of votes that Pam can cast for any one of the candidates for the positions on the board under cumulative voting?

Directors of a corporation must generally be selected from among the shareholders.

Which of the following is true about the required notice for shareholders' meetings?

An annual financial statement must be furnished to all of a corporation's shareholders.

It is mandatory that the directors pay dividends to all of a corporation's shareholders.

Betty is a stockholder of Bluebird Corporation.The directors,as a group,have forced Bluebird to commit an ultra vires act.Betty wishes to sue the directors on behalf of Bluebird.This lawsuit is best described as:

Shareholders have absolute liability for the debts and obligations of the corporation.

Which of the following is likely to be a breach of a corporate officer's/director's duty of care?

Several recent college graduates perfect a new beer that uses large amounts of garlic in the brewing process.They form a corporation called Garlicbrew,Inc.to produce and market this beer.Nance buys 100 shares of the 10,000 shares in Garlicbrew's initial public offering.Nance wants access to corporate records in order to learn more about the company so she can be a more informed shareholder.She also wants to learn about Garlicbrew because she is considering starting a company to develop and market a beer that uses onions in the brewing process.The corporate officers refuse to let Nance have access to any records of the corporation.Can Nance force the officers to allow her access?

A shareholder's right to inspect the shareholders' list,articles of incorporation,and bylaws is absolute.

Mary was just appointed a vice president of LMN Corporation and placed in charge of their Chicago plant.As soon as she takes over,she hires a new employee and signs a contract for the purchase of needed supplies from Joe's Supply.When the payroll arrives at the LMN corporate office for approval,the president refuses to approve payment for the new employee that Mary hired.Similarly,the president refuses to approve payment for the supplies purchased from Joe's.The new employee and Joe sue both LMN and Mary for payment.What is the result?