To Be Successful in a Court Challenge Regarding an Executive's

question 28

Multiple Choice

To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:

• A) the board was grossly uninformed before it set the compensation amount.
• B) the executive's performance caused the business to become unprofitable.
• C) the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company.
• D) the compensation level is not in the company's best interests.

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Definitions:

Voidable Contracts

Agreements that may be legally rejected or enforced by one or more parties, often due to elements like misrepresentation or lack of capacity.

Stare Decisis

“Standing by the decision” a principle stating that rulings made in higher courts are binding precedent for lower courts.

Watered Stock

Stock that is issued to individuals below its fair market value.

Fair Market Value

The price a willing buyer would pay a willing seller in a transaction where both parties have reasonable knowledge of the relevant facts and neither is under compulsion to act.