Business law 1 part four Flashcards
(26 cards)
What can shareholders be considered in relation to conflicting interests?
Shareholders can be considered as a class in relation to conflicting interests, such as those of directors.
How can ownership of shares be characterized?
Ownership of shares can be concentrated or dispersed.
What rights do controlling shareholders have compared to non-controlling shareholders?
Controlling shareholders have appointment and decision rights, while non-controlling shareholders have rewards, trusteeship, standards, disclosure, and the option to disinvest.
What type of board do shareholders elect in countries like the U.S., U.K., and Japan?
Shareholders elect a one-tier board where directors manage and supervise the CEO.
What is a two-tier board, and in which countries is it common?
A two-tier board consists of a board of directors and a supervisory board, commonly found in countries like France, Italy, Germany, and Brazil.
What issue leads to rational apathy among shareholders?
Voting carries a cost for shareholders, leading to rational apathy.
What are proxy voting and distance voting solutions to?
They are solutions to the issue of rational apathy among shareholders.
What do financial intermediaries like banks do in the context of shareholder voting?
They collect proxies.
What role do proxy advisers like ISS and Glass Lewis play?
They provide services in the proxy voting sector.
What power do shareholders have regarding directors?
Shareholders have the power to elect and remove directors.
What is a potential issue with controlling shareholders regarding director elections?
Controlling shareholders may prioritize their own interests.
What distinguishes pension funds from hedge funds in terms of investment strategy?
Pension funds are long-term investors, while hedge funds are short-term investors.
What is the power to remove directors considered in many countries?
It is considered a strong remedy to agency costs.
What must many operations in corporations receive from shareholders?
They must be approved or ratified by the assembly of shareholders.
What can independent directors control in a corporation?
They can control critical aspects or operations.
What are stock options used for in executive compensation?
They incentivize directors by allowing them to buy shares at a predetermined price.
What is the Business Judgment Rule?
It protects directors from judgment if they acted in good faith, in the best interests of the corporation, with loyalty, informed decision-making, and without wastefulness.
What does the term ‘One Share - One Vote’ refer to?
It refers to the principle that the power to control the corporation is determined by the amount of risk one takes.
What is vote capping and its purpose?
Vote capping limits the power of a shareholder by imposing a maximum limit on their voting rights, protecting minority shareholders.
What is the principle of Equal Treatment of Shares?
It safeguards minority shareholders by ensuring that dividends are distributed fairly.
What is the Coase Theorem proposed by Ronald Coase?
It states that if transaction costs are low and property rights are well-defined, common goods can be allocated through bargaining.
What does the Corporate Sustainability Reporting Directive (CSRD) require?
It requires large and listed companies in the EU to disclose information on social and environmental issues and impacts.
What are Benefit Corporations defined by law meant to achieve?
They aim to make a positive impact on society, workers, the community, and the environment.
What is the role of creditors in relation to a corporation?
Creditors lend money or provide goods and services to a corporation and expect repayment.
