ABC Co Is Owned by a Group of Shareholders, All of of Whom

question 205

Multiple Choice

ABC Co. is owned by a group of shareholders, all of whom vote independently and all of whom want personal control over the firm. If straight voting is used, a shareholder:

• A) Must either own enough shares to totally control the elections or else he/she has no control whatsoever.
• B) Will be able to elect at least one director as long as there are at least three open positions and the shareholder owns at least 25% plus one of the outstanding shares.
• C) Must own at least two-thirds of the shares, plus one, to exercise control over the elections.
• D) Is only permitted to elect one director, regardless of the number of shares owned.
• E) Who owns more shares than anyone else, regardless of the number of shares owned, will control the elections.

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Definitions:

Marginal Benefit

The extra benefit or utility received from the consumption or production of an additional unit of a product or service.

Public Goods

Goods or services that are available for consumption by everyone and where use by one individual does not reduce availability to others.

Private Philanthropy

Financial donations made by private individuals or organizations to charitable causes, often aimed at public welfare improvement.

Free-Rider Problem

A market failure that occurs when individuals consume a good without paying for it, typically in the context of public goods.