Corporate Governance Shareholder Rights & Activism 3

Question 1

What is a 'white knight' in the context of hostile takeovers?

Accepted Answer

A friendly acquirer sought by the target company's board to avoid a hostile bid

Answer

A white knight is a preferred acquirer that a target company solicits to rescue it from a hostile takeover attempt by an unwanted bidder.

Question 2

Which SEC filing must activist investors use to publicly disclose an ownership stake exceeding 5% with intent to influence the company?

Accepted Answer

Schedule 13D

Answer

Schedule 13D must be filed by investors who acquire more than 5% of a company's shares with activist intent, unlike the passive-investor Schedule 13G.

Question 3

What is an 'empty voting' problem in corporate governance?

Accepted Answer

When a shareholder holds voting rights without corresponding economic interest

Answer

Empty voting occurs when a party has voting rights in excess of their economic stake, often through derivatives or stock lending, creating misaligned incentives.

Question 4

What does 'universal proxy' allow shareholders to do in director elections?

Accepted Answer

Vote for any combination of management and dissident director nominees on a single ballot

Answer

Universal proxy rules, effective since 2022, allow shareholders to mix and match nominees from both management's and the dissident's slates on one ballot card.

Question 5

What is a 'golden parachute' in executive compensation governance?

Accepted Answer

A large severance package triggered when an executive is terminated following a change of control

Answer

Golden parachutes are substantial compensation benefits paid to executives if they lose their jobs following a merger or acquisition.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Shareholder Rights & Activism 3