Kingpin804

Shareholder-sponsored resolutions are something investors can consider in order to be “heard”. These resolutions do have implications for investors. Which of the following statements regarding shareholder-sponsored resolutions is least accurate?

A) The right to propose initiatives for consideration at the firm’s annual meeting is one way for shareholders to send a message that they are dissatisfied with the way the board is handling one or more firm matters.

B) The ability shareholders have to propose needed changes in a firm can serve to erode shareholder value.

C) The right to propose initiatives for consideration at the firm’s annual meeting is one way for shareholders to send a message that they are dissatisfied with the way management is handling one or more firm matters.

---

The ability to bring issues in front of the board and/or management can serve to prevent erosion of shareholder value.

Kingpin804

Which of the following is least likely to be considered a “best practice” regarding corporate governance?

A) Use of a third party to tabulate votes and retain voting records.

B) A code of ethics that is audited and improved periodically.

C) Board members are limited to a six-year term.

---

Anything beyond 2- or 3-year term limits on board membership has the potential to restrict the ability for shareholders to change the composition of the board if its members are not acting in the shareholders’ best interest.

Kingpin804

The most likely outcome of adopting a golden parachute, poison pill, or greenmail is a:

A) negative impact on the stock price and a greater possibility for a successful takeover bid.

B) reduced possibility for a successful takeover bid and a positive impact on the stock price.

C) reduced possibility for a successful takeover bid and a negative impact on the stock price.

---

Adopting a golden parachute, poison pill, or greenmail are all take-over defenses used to frustrate an acquisition attempt. The barriers created by such defenses are likely to decrease the value of the stock.

Kingpin804

Which of the following would NOT be a good source for information about a company’s proxy voting rules?

A) Company’s articles of organization and by-laws.

B) Firm’s corporate governance statement.

C) Firm’s annual report.

---

The annual report would typically not contain this detailed information.

Kingpin804

One of the issues shareholders should consider is the issue of confidential voting of proxies. Which of the following statements would be considered most accurate in regard to proxy voting and confidential votes?

A) It is an SEC requirement that the proxy voting process be confidential.

B) Shareholders are more likely to vote conscientiously if allowed to do so confidentially.

C) Confidentiality of voting does not ensure that all votes are counted equally.

---

Shareholders will be more likely to vote and vote conscientiously if they are sure that board members and/or management will not find out how they voted. There is no SEC requirement of confidentiality regarding proxy voting. Confidentiality of voting does insure that all votes are counted equally.

Kingpin804

All of the following negatively affect shareholders’ proxy voting rights, EXCEPT:

A) allowing proxy voting by means other than a paper ballot.

B) preventing investors who wish to vote their shares from trading during a period prior to the annual meeting.

C) requiring attendance at the annual meeting.

---

Allowing proxy voting by means other than a paper ballot has a positive impact on shareholders’ proxy voting rights. Both of the remaining choices negatively affect shareholders’ proxy voting rights.

Kingpin804

Which of the following rights concerning shareholder-sponsored board nominations and shareholder-sponsored resolutions would be advantageous to an investor?

A) The right to nominate or remove board members in certain circumstances, and the right to propose initiatives for consideration at the annual meeting.

B) The right to propose initiatives for consideration at the annual meeting, but not the right to nominate or remove board members in certain circumstances.

C) The right to nominate or remove board members in certain circumstances, but not the right to propose initiatives for consideration at the annual meeting.

---

Investors need the power to put forth an independent board nominee. In addition, the right to propose initiatives for consideration at the annual meeting is an important method to send a message to management.

Kingpin804

Which of the following actions would most likely have a positive influence on shareholder value?

A) Executive board members regularly attend the board meetings.

B) Only one class of common equity has been issued.

C) Adopting a poison pill.

---

Firms with dual classes of equity can have a negative effect on shareholder value as the shareholder may have inferior voting rights. Takeover measures such as poison pills, golden parachutes, and greenmail typically have a negative effect on shareholder value. Annual elections are preferred for board members as it increases accountability. Executive board members regularly attending the meetings can potentially prevent free discussion among the independent members.

Kingpin804

Which of the following statements regarding company takeover defenses is CORRECT?

A) Newly created anti-takeover provisions may or may not require stakeholder authorization/approval.

B) The firm’s annual report contains pertinent details concerning takeover defenses.

C) A firm’s proxy is the most likely place to find information about present takeover defenses.

---

These provisions may or may not require such approval. In either case, the firm may have to, at a minimum, provide information to its shareholders about any amendments to existing takeover defenses. A firm’s articles of organization are the most likely places to locate information about present takeover defenses.

Kingpin804

When examining a firm’s ownership structure, it is imperative to examine any super-voting rights by certain classes of shareholders. Which of the following statements concerning these voting rights is most accurate?

A) If a company has a significant minority shareowner group, such as a founding family, cumulative voting to elect board members can be a positive factor for shareholders.

B) Super-voting rights by certain classes of shareholders impair the firm’s ability to raise capital for the future.

C) Firms with a single class of common equity could encourage prospective acquirers to only deal directly with shareholders with the supermajority rights.

---

Firms with dual classes of common equity could encourage prospective acquirers to only deal directly with shareholders with the supermajority rights. If the firm has a significant minority ownership group, such as a founding family, use of cumulative voting to elect board members can favor specific interests at the expense of the interests of other shareholders.