Directors Who Are Not as Directly Connected to the Firm

question 42

Multiple Choice

Directors who are not as directly connected to the firm but who have existing or potential business relationships with the firm are called:

• A)gray directors.
• B)independent directors.
• C)advising directors.
• D)inside directors.

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Definitions:

Ownership

The legal right or state of having complete control and possession over property, assets, or items, which includes the ability to use, manage, and dispose of them.

Business Judgment Rule

A legal principle that protects corporate directors and officers from liability for decisions made in good faith and in the best interests of the corporation, even if the decisions are ultimately unsuccessful.

Insolvent

A financial state in which an individual or entity cannot meet its debt obligations as they come due because its liabilities exceed its assets.

Stock Warrants

Securities that give the holder the right to purchase company stock at a specified price before a certain date.