Future Business Leaders of America (FBLA) Agribusiness Practice Test

Who approves the bylaws of a corporation?

1. The CEO only

2. Shareholders and the board of directors

3. The attorney representing the corporation

4. The Secretary of State

The correct answer is: Shareholders and the board of directors

The approval of a corporation's bylaws is essential as it establishes the rules and framework within which the corporation operates. This process typically involves both the shareholders and the board of directors. Shareholders, who are the owners of the corporation, have a vested interest in the governance and operational guidelines, while the board of directors is responsible for overseeing the management of the corporation and ensuring adherence to these rules. The combined approval reflects the principle of checks and balances within corporate governance, ensuring that management (represented by the board) and ownership (the shareholders) are aligned on how the company should function. This collaborative approach not only helps in achieving transparency but also in safeguarding the interests of all parties involved. Other options may imply a misunderstanding of corporate governance. For example, having only the CEO approve the bylaws undermines the checks and balances system, and removing input from shareholders could raise issues about accountability and representation. Similarly, an attorney's role is typically advisory and does not include formal approval of operational documents, while government entities like the Secretary of State are involved in the registration and compliance aspects rather than internal governance matters. Hence, the correct choice effectively illustrates the cooperative process necessary for establishing a corporation's foundational rules.