Question

What does it mean for a company to have a "staggered board of directors?"

A. Only a portion of the directors are elected each year. Thus, replacing the entire board takes some years to accomplish. This is one of the available shark repellents.

B. Members of the board come from shareholders, outside of the company, and from officers.

C. The board members serve staggered terms of years (e.g., 1 year or 2 years or 3 years), depending on their availability to serve. Such a flexible method of appointing board members is one way to encourage talented individuals to serve.  

D. A staggered board of directors is a board that operates through the use of staggered committees, such as the compensation or the bylaws committees.   

The Business Judgment Rule

A.does require decisions to be made in the best interests of all stakeholders.

B. does require decisions to be made in the best interests of the corporation.

C. does not require good faith.

D. will not protect board members from decisions that harm the company

Which of the following laws regulates tender offers of publicly traded companies?

A. The Williams Act

B. The Hatch Act

C. The Colburn Act

D. The Taft Act

An antitakeover device that interferes with an outsider's ability to buy a company's stock is known as what?

A. Asset Lockup

B. Tender Offer

C. Poison Pill

D. Greenmail

Answer 1

1st Question:

Correct answer is option A. Staggered board is refered to a situation where all the board members can't be appointed at a time in a single year. During hostile takeovers, the acquirer try to replace the entire board with his own members so that the new board can approve the takeover. So in staggered board, say1/3rd of board members can be appointed in a year then it will take more than one year for the acquirer to get majority in board and this will help the management to buy some time and think of alternatives.

2nd Question:

The correct option is B: Business Judgement rule states that board of directors should take decisions that are in the best interest of the corporation.Here corporation is a separate entity. Illegal decisions shouldn't be taken and are not protected by Business Law.

3rd Question

The correct answer is option A: The law that regulates tender offer of publicly traded company is William Act. It states important points like the length of the tender, procedure to modify tender offer etc.

4th Question

The correct option is C: When a hostile takeover is happening, the acquirer tries to buy maximum shares from the market. So Poison pill gives right to existing shareholders to buy shares at a discounted price. So the acquirer will not have enough shares to establish control.