Question 1

If a court determines that a manager's corporate decision amounted to self-dealing,

Accepted Answer

A) the business judgment rule will not apply. 
B) the transaction being challenged will be automatically voided. 
C) the manager is automatically personally liable to the corporation. 
D) the manager will automatically be fired. 
A) the business judgment rule will not apply. 
B) the transaction being challenged will be automatically voided. 
C) the manager is automatically personally liable to the corporation. 
D) the manager will automatically be fired. A

Question 2

Which of the following is correct concerning anti-takeover efforts?

Accepted Answer

A) Most states have passed laws to deter hostile takeovers, but these statutes have not totally eliminated hostile takeovers. 
B) Federal statutes have been more effective than state statutes in eliminating hostile corporate takeovers. 
C) The most effective federal statute has been the Poison Pill Act. 
D) The Williams Act has been the most effective legislation in regulating of the actions of the target company. 
A) Most states have passed laws to deter hostile takeovers, but these statutes have not totally eliminated hostile takeovers. 
B) Federal statutes have been more effective than state statutes in eliminating hostile corporate takeovers. 
C) The most effective federal statute has been the Poison Pill Act. 
D) The Williams Act has been the most effective legislation in regulating of the actions of the target company. A

Question 3

In order to use poison pills,staggered boards of directors,and supermajority voting as takeover defenses,they must first be authorized by the shareholders.

Accepted Answer

A) True 
 B)False  True

Question 4

A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.

Accepted Answer

A) True 
 B)False

Question 5

The Williams Act

Accepted Answer

A) is designed to regulate the conduct of those attempting to take over a company. 
B) is designed to regulate the conduct of the target company subject to a takeover. 
C) was established to prohibit corporate defensive tactics. 
D) was established to resolve conflicts of interests between directors and stakeholders. 
A) is designed to regulate the conduct of those attempting to take over a company. 
B) is designed to regulate the conduct of the target company subject to a takeover. 
C) was established to prohibit corporate defensive tactics. 
D) was established to resolve conflicts of interests between directors and stakeholders.

Question 6

Which of the following describes the duty of loyalty?

Accepted Answer

A) It requires managers to make decisions they reasonably believe to be in the best interest of the corporation. 
B) It prohibits managers from making a decision that benefits them at the expense of the corporation. 
C) It requires consideration of the interests of the surrounding community. 
D) It requires using care that an ordinarily prudent person would take in a similar situation. 
A) It requires managers to make decisions they reasonably believe to be in the best interest of the corporation. 
B) It prohibits managers from making a decision that benefits them at the expense of the corporation. 
C) It requires consideration of the interests of the surrounding community. 
D) It requires using care that an ordinarily prudent person would take in a similar situation.

Question 7

Generally,managers that make informed decisions will not be liable even if their decision turned out badly.

Accepted Answer

A) True 
 B)False

Question 8

RayCorp offers to buy out MegaCorp by paying $69 per share.LandCo,who also wants to buy MegaCorp,offers to pay $75 per share.When the bidding process is finally over,RayCorp has offered $85 per share and LandCo has offered to pay $90 per share.MegaCorp agrees to sell to RayCorp on grounds that,all things considered,the takeover by RayCorp would be better for the business.LandCo claims that MegaCorp should have sold the company to it since it was the highest bidder.Is LandCo correct?

Accepted Answer

A) Yes.This is a breach of duty.MegaCorp must sell the company to the highest bidder; it cannot give preferential treatment to a lower bidder. 
B) No. This is covered by the Williams Act. 
C) No. The directors have broad discretion in deciding to whom to sell the company. 
D) No. MegaCorp is acting in good faith by considering all things, not just the offering price of the shares. 
A) Yes.This is a breach of duty.MegaCorp must sell the company to the highest bidder; it cannot give preferential treatment to a lower bidder. 
B) No. This is covered by the Williams Act. 
C) No. The directors have broad discretion in deciding to whom to sell the company. 
D) No. MegaCorp is acting in good faith by considering all things, not just the offering price of the shares.

Question 9

What type of transaction employs special committees made up of disinterested board members who review the transaction to determine if it is entirely fair to the corporation?

Accepted Answer

A) Hostile takeover 
B) Self-dealing 
C) Rational business purpose 
D) Corporate opportunity 
A) Hostile takeover 
B) Self-dealing 
C) Rational business purpose 
D) Corporate opportunity

Question 10

The Anderson v.Bellinocase held that

Accepted Answer

A) the defendant did not act in good faith and violated the corporate opportunity doctrine. 
B) the business judgment rule protected the plaintiff's decision to award the Keno contract to an outside firm. 
C) the plaintiff was not able to show that the defendant violated the corporate opportunity doctrine. 
D) the defendant's action was not a conflict of interest and was made in good faith. 
A) the defendant did not act in good faith and violated the corporate opportunity doctrine. 
B) the business judgment rule protected the plaintiff's decision to award the Keno contract to an outside firm. 
C) the plaintiff was not able to show that the defendant violated the corporate opportunity doctrine. 
D) the defendant's action was not a conflict of interest and was made in good faith.

Question 11

A manager who first offers an opportunity to disinterested directors or shareholders who turn it down has the right to take advantage of the opportunity herself.

Accepted Answer

A) True 
 B)False

Question 12

The Williams Act regulates the conduct of the target company in a takeover situation.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the purposes of the "business judgment rule."

Accepted Answer

The "business judgment rule" is designed

Question 14

The Model Business Corporation Act states: "All corporate powers shall be exercised by or under the authority of,and the business and affairs of the corporation managed by or under the direction of its

Accepted Answer

A) shareholders." 
B) officers." 
C) board of directors." 
D) executive committee." 
A) shareholders." 
B) officers." 
C) board of directors." 
D) executive committee."

Question 15

A public offer to buy a block of stock directly from shareholders is called a tender offer.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the most appropriate term to use when describing management's duty to its shareholders?

Accepted Answer

A) Official duty 
B) Legal duty 
C) Fiduciary duty 
D) Statutory duty 
A) Official duty 
B) Legal duty 
C) Fiduciary duty 
D) Statutory duty

Question 17

Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?

Accepted Answer

A) Courts offer the only legal protection to companies targeted for hostile takeovers. 
B) Statutory law offers the only legal protection to companies. 
C) Both statutory law and the state courts have provided some degree of protection for companies. 
D) State courts and state statutes have offered no protection for companies targeted for hostile takeovers. 
A) Courts offer the only legal protection to companies targeted for hostile takeovers. 
B) Statutory law offers the only legal protection to companies. 
C) Both statutory law and the state courts have provided some degree of protection for companies. 
D) State courts and state statutes have offered no protection for companies targeted for hostile takeovers.

Question 18

For the business judgment rule to apply,the manager must

Accepted Answer

A) be trying to resolve a conflict of interest. 
B) have exercised extraordinary care in resolving the situation. 
C) have acted in the best interests of the corporation. 
D) prove he or she was aware of the decision being made. 
A) be trying to resolve a conflict of interest. 
B) have exercised extraordinary care in resolving the situation. 
C) have acted in the best interests of the corporation. 
D) prove he or she was aware of the decision being made.

Question 19

A fundamental problem of the modern corporation is the conflict of interests between managers,shareholders,and stakeholders.

Accepted Answer

A) True 
 B)False

Question 20

On the day a tender offer begins,

Accepted Answer

A) greenmail must be sent to the SEC. 
B) a bidder must file a disclosure statement with the SEC. 
C) assets of the target corporation must be locked up until an inventory is completed. 
D) the SEC issues a binding order to the target company to file audited financial statements to the bidder. 
A) greenmail must be sent to the SEC. 
B) a bidder must file a disclosure statement with the SEC. 
C) assets of the target corporation must be locked up until an inventory is completed. 
D) the SEC issues a binding order to the target company to file audited financial statements to the bidder.

Exam 34: Management Duties

If a court determines that a manager's corporate decision amounted to self-dealing,

Which of the following is correct concerning anti-takeover efforts?

In order to use poison pills,staggered boards of directors,and supermajority voting as takeover defenses,they must first be authorized by the shareholders.

A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.

The Williams Act

Which of the following describes the duty of loyalty?

Generally,managers that make informed decisions will not be liable even if their decision turned out badly.

What type of transaction employs special committees made up of disinterested board members who review the transaction to determine if it is entirely fair to the corporation?

The Anderson v.Bellinocase held that

A manager who first offers an opportunity to disinterested directors or shareholders who turn it down has the right to take advantage of the opportunity herself.

The Williams Act regulates the conduct of the target company in a takeover situation.

Discuss the purposes of the "business judgment rule."

The Model Business Corporation Act states: "All corporate powers shall be exercised by or under the authority of,and the business and affairs of the corporation managed by or under the direction of its

A public offer to buy a block of stock directly from shareholders is called a tender offer.

Which of the following is the most appropriate term to use when describing management's duty to its shareholders?

Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?

For the business judgment rule to apply,the manager must

A fundamental problem of the modern corporation is the conflict of interests between managers,shareholders,and stakeholders.

On the day a tender offer begins,

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