Stock Lawyer Corporate Governance and Shareholder Rights 2

Question 1

What is 'say on pay' under the Dodd-Frank Act?

Accepted Answer

A mandatory shareholder advisory vote on executive compensation at least every three years

Answer

The Dodd-Frank Act requires public companies to hold a nonbinding shareholder advisory vote on executive compensation (say on pay) at least once every three years.

Question 2

What duty do corporate directors owe to the corporation under the Caremark standard?

Accepted Answer

A duty to implement and monitor compliance and reporting systems to detect legal violations

Answer

Under the Caremark standard (In re Caremark International Inc. Derivative Litigation), directors have a duty to ensure adequate information and reporting systems exist so the board can be informed of potential legal compliance failures.

Question 3

What is the 'entire fairness' standard in Delaware corporate law, and when does it apply?

Accepted Answer

The most rigorous standard of review, applied when directors have a conflict of interest, requiring proof of fair dealing and fair price

Answer

The entire fairness standard requires that a conflicted transaction demonstrate both fair dealing (the process) and fair price (the economic terms) — the burden shifts to the defendants to prove both elements.

Question 4

What is 'proxy access' in modern corporate governance?

Accepted Answer

A shareholder's right to include director nominees in the company's proxy materials at the company's expense

Answer

Proxy access allows qualifying shareholders to include their own director nominees in the company's proxy statement, giving them a low-cost mechanism to challenge board composition without a full proxy fight.

Question 5

Under Section 220 of the Delaware General Corporation Law, what right do shareholders have?

Accepted Answer

The right to inspect corporate books and records for a proper purpose

Answer

Section 220 gives shareholders the right to inspect and copy a corporation's books and records, including stockholder lists and meeting minutes, when they demonstrate a proper purpose such as investigating potential wrongdoing.

Stock Lawyer Practice Test

Stock Lawyer Practice Test

Stock Lawyer Corporate Governance and Shareholder Rights 2