Corporate Governance Fiduciary Duties & Legal Liability 1

Question 1

Which fiduciary duty requires corporate directors to act in the best interests of the corporation and its shareholders rather than pursuing personal gain?

Accepted Answer

Duty of loyalty

Answer

The duty of loyalty requires directors to prioritize the corporation's and shareholders' interests over their own personal interests.

Question 2

Under the Business Judgment Rule, courts will generally defer to a board decision if the directors acted on an informed basis, in good faith, and:

Accepted Answer

In the honest belief it was in the corporation's best interest

Answer

The Business Judgment Rule protects directors who act in good faith with the honest belief their decision serves the corporation's best interests.

Question 3

A director who learns of a corporate opportunity and pursues it personally without offering it to the corporation first most likely violates which duty?

Accepted Answer

Duty of loyalty

Answer

Usurping a corporate opportunity for personal benefit is a classic breach of the duty of loyalty.

Question 4

What standard does the duty of care typically require of corporate directors?

Accepted Answer

The same care a reasonably prudent person would exercise under similar circumstances

Answer

The duty of care applies an objective, reasonably prudent person standard to director conduct in similar circumstances.

Question 5

Which doctrine allows courts to review director decisions with heightened scrutiny when a board takes defensive measures in response to a hostile takeover?

Accepted Answer

Unocal doctrine

Answer

The Unocal doctrine requires boards to demonstrate a reasonable threat to corporate policy and that defensive measures are proportionate to that threat.

Corporate Governance Practice Test

Corporate Governance Practice Test

Corporate Governance Fiduciary Duties & Legal Liability 1