MGO 403: EXAM 1 QUESTIONS AND ANSWERS
100% CORRECT
what does the scope of limited liability in a corporation mean? - ANSWER that owners have
limited liability, owners are not personally liable for the debts of the corporation, in general
why might a lender insist on a personal guarantee (or collateral) from an owner when the
borrower has limited liability status? - ANSWER -if you form a corp as an individual, and you
wanted to borrow money from a bank, and you came to them and asked to borrow as Acme
Corp, the bank may not want to give money to you as the owner because you have limited
liability.
-when the bank does give you the money as the corp, they want the personal guarantee that
they will pay it back
pierce the corporate veil - ANSWER if a corporation is perpetuating fraud, the corporate form
will not be recognized and the owners can be found personally liable
corporate governance - ANSWER who has the power and responsibility
What do shareholders do? - ANSWER elect BOD
what does the BOD do? - ANSWER appoint/hire management
, what does management do? - ANSWER have the most day-to-day control of the corporation
Friedman on CSR - ANSWER does not believe in CSR...he thinks its all a marketing campaign
to make more money
close corporation - ANSWER only a few SH and not publicly traded stock
Dual-class structure - ANSWER -issuing various types of shares by a single company
-class A & class B shares: Class A has a significant amount of voting power
Inside director - ANSWER CEO & on the BOD
-can relay info that managers want to the BOD
-know day-to-day operations
-personal relationship w BOD
-problem with checks & balances
who are the Principal & Agent and what is the principal agent problem - ANSWER -Principal:
SH
-Agent: BOD, executive officers, employees
P&A problem: goal conflicts between the two
100% CORRECT
what does the scope of limited liability in a corporation mean? - ANSWER that owners have
limited liability, owners are not personally liable for the debts of the corporation, in general
why might a lender insist on a personal guarantee (or collateral) from an owner when the
borrower has limited liability status? - ANSWER -if you form a corp as an individual, and you
wanted to borrow money from a bank, and you came to them and asked to borrow as Acme
Corp, the bank may not want to give money to you as the owner because you have limited
liability.
-when the bank does give you the money as the corp, they want the personal guarantee that
they will pay it back
pierce the corporate veil - ANSWER if a corporation is perpetuating fraud, the corporate form
will not be recognized and the owners can be found personally liable
corporate governance - ANSWER who has the power and responsibility
What do shareholders do? - ANSWER elect BOD
what does the BOD do? - ANSWER appoint/hire management
, what does management do? - ANSWER have the most day-to-day control of the corporation
Friedman on CSR - ANSWER does not believe in CSR...he thinks its all a marketing campaign
to make more money
close corporation - ANSWER only a few SH and not publicly traded stock
Dual-class structure - ANSWER -issuing various types of shares by a single company
-class A & class B shares: Class A has a significant amount of voting power
Inside director - ANSWER CEO & on the BOD
-can relay info that managers want to the BOD
-know day-to-day operations
-personal relationship w BOD
-problem with checks & balances
who are the Principal & Agent and what is the principal agent problem - ANSWER -Principal:
SH
-Agent: BOD, executive officers, employees
P&A problem: goal conflicts between the two
