Question

1. First Corporation, a Massachusetts company, decides to expend $100,000 to publicize its support of a candidate in an upcoming presidential election. A Massachusetts statute forbids corporate expenditures for the purpose of influencing the vote in elections. Chauncey, a shareholder in First Corporation, feels that the company should support a different presidential candidate and files suit to stop the company’s publicizing efforts. What is the result? Why?

2. Assume in Exercise 1 that Chauncey is both an officer and a director of First Corporation. At a duly called meeting of the board, the directors decide to dismiss Chauncey as an officer and a director. If they had no cause for this action, is the dismissal valid? Why?

3. A book publisher that specializes in children’s books has decided to publish pornographic literature for adults. Amanda, a shareholder in the company, has been active for years in an antipornography campaign. When she demands access to the publisher’s books and records, the company refuses. She files suit. What arguments should Amanda raise in the litigation? Why?

4. A minority shareholder brought suit against the Chicago Cubs, a Delaware corporation, and their directors on the grounds that the directors were negligent in failing to install lights in Wrigley Field. The shareholder specifically alleged that the majority owner, Philip Wrigley, failed to exercise good faith in that he personally believed that baseball was a daytime sport and felt that night games would cause the surrounding neighborhood to deteriorate. The shareholder accused Wrigley and the other directors of not acting in the best financial interests of the corporation. What counterarguments should the directors assert? Who will win? Why?

5. The CEO of First Bank, without prior notice to the board, announced a merger proposal during a two-hour meeting of the directors. Under the proposal, the bank was to be sold to an acquirer at $55 per share. (At the time, the stock traded at $38 per share.) After the CEO discussed the proposal for twenty minutes, with no documentation to support the adequacy of the price, the board voted in favor of the proposal. Although senior management strongly opposed the proposal, it was eventually approved by the stockholders, with 70 percent in favor and 7 percent opposed. A group of stockholders later filed a class action, claiming that the directors were personally liable for the amount by which the fair value of the shares exceeded $55—an amount allegedly in excess of $100 million. Are the directors personally liable? Why or why not?

Answer 1

Ans =1 So, in the case one, the Massachusetts company, decides to expend $100,000 to publicize its support of a candidate in an upcoming presidential election and it also  forbids corporate expenditures for the purpose of influencing the vote in elections. Yes the corporation can do that it can expend its fund to support the candidate and also forbid the corporate expenditures . According to law, The company may lawfully conduct all acts that are necessary or appropriate to running it's operations and survival of company.

The shareholders are the owners of the corporation, but they have little decision-making authority. Shareholders do retain some degree of control. For example, they elect the directors, although only a small fraction of shareholders control the outcome of most elections because of the diffusion of ownership and modern proxy rules; proxy fights are extremely difficult for insurgents to win. Shareholders also may adopt, amend, and repeal the corporation’s bylaws; they may adopt resolutions ratifying or refusing to ratify certain actions of the directors. And they must vote on certain extraordinary matters, such as whether to amend the articles of incorporation, merge, or liquidate.power at meetings, typically through voting for directors. Statutes, bylaws, and the articles of incorporation determine how voting occurs—such as whether a quorum is sufficient to hold a meeting or whether voting is cumulative. Shareholders need not be present at a meeting—they may use a proxy to cast their votes or set up voting trusts or voting agreements. Shareholders may view corporate documents with proper demand and a proper purpose. Some corporations permit shareholders preemptive rights—the ability to purchase additional shares to ensure that the ownership percentage is not diluted. A shareholder may also file suit on behalf of the corporation—a legal proceeding called a derivative action. so, these are all the powers of shareholder and what the shareholder can do . In this case if the shareholder wants the other person to elected .yes he have a voting right for that but only one shareholder have one right to vote so , in this case he cannot stop the corporation beacuse it's beyond it's powers . And he also cannot file the case against the company in this case the shareholder can only file complain against the corporation when company is doing something illegal . Shareholder can only win this situation by cumulative voting so cumulative voting means that a shareholder may distribute his total votes in any manner that he chooses—all for one candidate or several shares for different candidates. With cumulative voting, each shareholder has a total number of votes equal to the number of shares he owns multiplied by the number of directors to be elected. Thus if a shareholder has 1,000 shares and there are five directors to be elected, the shareholder has 5,000 votes, and he may vote those shares in a manner he desires (all for one director, or 2,500 each for two directors, etc.). Some states permit this right unless the articles of incorporation deny it. Other states deny it unless the articles of incorporation permit it. Several states have constitutional provisions requiring cumulative voting for corporate directors. So he can give is all the vote to their favourite candidate. But in this situation we are assuming that the chauency have a highest shares in the company.

Ans 2 =  Yes, the dismissal is valid . Many state statutes expressly permit the board to fire an officer with or without cause. However, removal does not defeat an officer’s rights under an employment contract. Shareholders may remove directors with or without cause at any meeting called for the purpose. A majority of the shares entitled to vote, not a majority of the shares represented at the meeting, are required for removal. they just have to pass a ordinary order in general meeting . But removal of director only can done when the all shareholder or half of them have majority .

A director may be removed either by the shareholders or by the board of directors beacuse it is stated in company law .

Ans 3 = Yes amanda. Can file the suit against the company . Beacuse she is a shareholder of the company and she also active in antipornographical content. According to the power of shareholder  are legally entitled to inspect the records of the corporation in which they hold shares. These records include the articles of incorporation, bylaws, and corporate resolutions. It can also file a suit against Improper purposes which include uncovering trade secrets for sale to a competitor or compiling mailing lists for personal business purposes.

So , in this case the Amanda can say in court that the book which the corporation is selling is illegal beacuse the book is manufacturerd for child and in the books contains sexually content.

And the second thing .she is the shareholder of the company and she have a right to look in all the matters of company dealing she have a right see what is company selling .

And thirdly she have also have a purpose to see the all the books and other operations and sue beacuse she is has been active for years in an antipornography campaign.

She can give all these reasons at court beacuse these are all the rights which is layed down under the act.