Which One of the Following Is an Example of Breach

question 132

Multiple Choice

Which one of the following is an example of breach of fiduciary duty?

• A) The directors refused to declare a dividend, contrary to the request by its preferred shareholders.
• B) A shareholder owning 2% of the outstanding shares started a business in direct competition with the corporation in which he held shares.
• C) An officer of the corporation learned of a business opportunity intended for the corporation and intercepted it for his own benefit.
• D) The directors of the corporation refuse to give a pay raise to the employees although they had not received a pay raise for five years.
• E) A director profited $120,000 from a contract between the corporation and a firm in which he had an interest after he made full disclosure of his interest to the board of directors and abstained from the vote on the contract.

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Definitions:

Moral Hazard

The situation where the behavior of one party changes to the detriment of another after a transaction has occurred.

Credit Union

A member-owned financial cooperative, controlled by its members and operating for the purpose of providing credit at competitive rates, as well as other financial services to its members.

Opportunistically

Acting Opportunistically means taking advantage of situations with little regard for principles or consequences, often seeking to benefit at the expense of others.

Market Signal

Information or indicators that guide economic agents in making decisions about buying, selling, entering, or exiting markets based on current or future trends and conditions.