Lesson 9

Question 1

Conflict of Interest

Answer 1

Directors, as part of their fiduciary duty to the corporation, have a duty of loyalty to the corporation. This means that they must serve the corporation’s best interests without regard to personal gain. Conflict of interest problems arise in four general areas:

1. Self-dealing transactions with the corporation, either direct or indirect.
2. Executive compensation.
3. Usurpation of corporate opportunities.
4. Competing with the corporation.

Question 2

Interested Director

Answer 2

An “interested” director is one with a conflict of interest involving the transaction in question.

Question 3

Dividend

Answer 3

A dividend is a pro rata distribution of a corporation’s property to its shareholders.

Question 4

Retained Earnings

Answer 4

The accumulated but undistributed profits of the corporation, sometimes called “earned surplus.”

Question 5

Treasury Stock

Answer 5

Stock which a corporation once issued and subsequently reacquired.