1. Managing the Corporation Section 29.1

2. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Managing the Corporation Section 29.2 Management Responsibilities 29 Chapter Operating a Corporation

3. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation What You’ll Learn How to define corporate director (p. 626) How to define corporate officer (p. 626)

4. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation What You’ll Learn How to identify shareholders’ rights (p. 627) How to identify shareholder voting techniques (p. 629)

5. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Why It’s Important Understanding the nature of corporate management will help you protect your rights as a corporate shareholder.

6. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Legal Terms directors (p. 626) officers (p. 626) shareholder (p. 627) proxy (p. 630) voting trust (p. 630)

7. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Legal Terms pooling agreement (p. 631) shareholder proposal (p. 631) direct suit (p. 631) derivative suit (p. 631)

8. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Corporate Management Board of Directors Officers Shareholders Section Outline

9. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholder Rights Right to Receive Dividends Right to Receive a Stock Certificate Right to Examine Books and Records Section Outline

10. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholder Rights, continued Right to Transfer Shares of Stock Right to Maintain a Proportionate Share Right to Vote Right to Sue Section Outline

11. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Pre-Learning Question How is a corporation managed?

12. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Unlike a sole proprietorship or a partnership, in which power is concentrated in the hands of a few individuals, power in a corporation is scattered among many individuals and institutions. Corporate Management

13. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Corporations are managed by a group of directors, who meet and vote as a board to set the policies. They are responsible for seeing that the corporation acts within its powers. Board of Directors

14. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Corporate officers are appointed by and can be removed by the corporation’s directors. Officers

15. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation They include Officers a president vice-president(s)secretarytreasurer assistant officers other agents

16. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Officers’ jobs are to implement the policies of the directors by carrying out day-to-day operations of the corporation. Officers

17. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Corporations need money, called capital, which is obtained by selling units, or shares, of stock in the company. Shareholders

18. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation If you buy one or more shares, you become a shareholder (also called a stockholder), a member of the corporation. Shareholders

19. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Pre-Learning Question What rights do shareholders have?

20. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders have the right to Shareholder Rights receive dividends receive a stock certificate examine books and records

21. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation transfer shares of stock maintain a proportionate share votesue Shareholder Rights

22. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Dividends are profits distributed to stockholders. They are usually payable when declared by the board of directors. Right to Receive Dividends

23. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation A stock certificate is proof that you own a part of the corporation. Right to Receive a Stock Certificate

24. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation The law requires a corporation to keep accurate records of its business. Right to Examine Books and Records

25. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Right to Examine Books and Records These records include: a list of all shareholders accurate accounting of all transactions minutes of all meetings held by the directors and shareholders

26. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders have a statutory right to see these records. To gain access to them, a shareholder must make a written request stating the purpose of the examination. Right to Examine Books and Records

27. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Right to Transfer Shares of Stock Shareholders have the right to sell or transfer shares of stock. If you sell, you are the transferor. If you buy, you are the transferee.

28. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders usually have the right to purchase a proportionate share of every new stock issue before the corporation offers it to the public. This is called the shareholder’s preemptive right. Right to Maintain a Proportionate Share

29. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders have voting powers as part owners. A corporation can grant full voting rights only to holders of common stock. Holders of preferred stock usually have no voting rights. Right to Vote

30. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation The incorporation statutes of most states and the Model Business Corporation Act provide that a meeting of a corporation’s shareholders be held annually. Right to Vote

31. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation A majority of the shareholders must be present or represented by a proxy before business can be conducted. A proxy is the right to vote another shareholder’s stock. Right to Vote

32. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation proxy voting voting trusts pooling agreements shareholder proposals Voting Powers

33. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Sometimes shareholders try to control the election of the board of directors by buying a majority of the shares. Proxy Voting

34. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation If they cannot buy the necessary shares or not enough shares are for sale, they solicit the proxies of other shareholders. Proxy Voting

35. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Under the terms of a voting trust, shareholders transfer their voting rights to a trustee. A voting trust attempts to control the corporation by concentrating voting power in the voting trustees. Voting Trusts

36. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Instead of a voting trust, a group of shareholders may make a pooling agreement, or a contract to vote in a certain way on a particular issue. Pooling Agreements

37. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders have the right to participate in shareholder meetings, including a chance to speak and offer a shareholder proposal--a resolution or policy suggested by a shareholder. Shareholder Proposals

38. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation It may be an amendment to the corporation’s articles, a limit on the corporation’s charitable contributions, a ceiling on the pay of the corporation’s top executives, or some other suggestion. Shareholder Proposals

39. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders have the right to sue the corporation to enforce their rights and to sue others on behalf of the corporation to enforce rights it has neglected. Right to Sue

40. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Shareholders may bring Right to Sue a direct suit if they believe that they have been deprived of rights that belong to them a class action lawsuit against a corporation on behalf of all shareholders in their position

41. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation In a derivative suit, shareholders sue the corporation’s management on behalf of the corporation. It is based on an injury to the corporation. Right to Sue

42. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Which shareholder right is being demonstrated.

43. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation 1.Maria Fuentes, who owns stock in the ABC Corporation, wrote a letter to its Chief Financial Officer for copies of last year’s income statement and balance sheet.

44. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation ANSWER Right to examine books and records.

45. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation 2.Ms. Fuentes sold her stock in ABC Corporation through a stockbroker in order to buy stock in the XYZ Company.

46. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation ANSWER Right to transfer all shares.

47. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned 1. 1.What is a corporate director? Section 29.1 Assessment

48. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned Someone who is part of a group that manages a corporation by meeting and voting as a board to set the policies and is responsible for seeing that the corporation acts within its powers. Section 29.1 Assessment Answer

49. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned 2. 2.What is a corporate officer? Section 29.1 Assessment

50. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned Someone who is appointed by and can be removed by the corporation’s directors. Officers implement the policies of the directors by carrying out day-to-day operations of the corporation. Section 29.1 Assessment Answer

51. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned 3. 3.What rights do shareholders possess? Section 29.1 Assessment

52. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned Right to receive dividends, receive a stock certificate, examine books and records, transfer shares of stock, maintain a proportionate share, vote, and sue. Section 29.1 Assessment Answer

53. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned 4. 4.How can shareholders exercise their right to vote their shares? Section 29.1 Assessment

54. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Reviewing What You Learned By being present at the annual meeting, and through the use of proxies, shareholder proposals, pooling agreements, and voting trusts. Section 29.1 Assessment Answer

55. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Assessment Critical Thinking Activity Shareholder Rights Why should shareholders be able to sue their own corporation?

56. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Assessment Critical Thinking Activity Answer Shareholder Rights Answers will vary but should suggest that shareholders have the right to sue the corporation to enforce their rights.

57. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Assessment Legal Skills in Action Shareholder Proposals Your cousin, Julianne, has decided to initiate a shareholder proposal in time for the next meeting of Yellowrock Pharmaceuticals, Inc.

58. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Assessment Legal Skills in Action Shareholder Proposals Write a letter to Julianne in which you remind her of all the requirements she will need to meet before presenting her proposal.

59. Understanding Business and Personal Law Managing the Corporation Section 29.1 Operating a Corporation Section 29.1 Assessment Legal Skills in Action Answer Shareholder Proposals Answers will vary, but she could discuss an amendment to the corporation’s articles, a limit on the corporation’s charitable contributions, a ceiling on the pay of the corporation’s top executives, or some other suggestion.

60. Managing the Corporation End of Section 29.1