[Battle for the Board] the Board of Directors of InfoHub

question 14

Multiple Choice

[Battle for the Board] The Board of Directors of InfoHub, an internet service provider, contains 9 directors. Two of the directors, Jude and Rostan, decide they want to replace several of the directors with individuals who support their position and then take over the Board and control the company. Jude thinks it's a long shot, but Rostan tells him they could do it because Rostan has gradually been accumulating shares and they can get a majority of proxies on their side. Jude says the proxies are not important, because it's the shareholders that vote for the members of the board but it is difficult for them to find the names of shareholders. Rostan tells him not to worry, because he will get the shareholder list and focus only a few key shareholders, then get their proxies on his side before the next shareholder meeting.
-Is InfoHub likely to refuse to provide the shareholder list?

• A) Probably not. Most companies provide them voluntarily because federal law requires target corporations to assist aggressors in some ways.
• B) Probably not, since companies are required to provide them.
• C) Yes, corporations always refuse to provide shareholder lists because of the threat of takeovers.
• D) Yes, although federal law requires target corporations to assist aggressors in some ways, aggressors are prohibited from access to shareholder lists.
• E) Yes, federal securities law protects target corporations from aggressors.

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Definitions:

Value Foregone

The opportunity cost of choosing one investment or action over another, representing the benefits lost from not selecting the alternative.

Cost of Capital

The lowest return required for a project involving capital investment, such as building a new production plant, to be deemed feasible.

Mutually Exclusive

In project selection or decision making, mutually exclusive refers to options where the selection of one option precludes the selection of another.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period of time.