Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 495

After the application of incorporation has been approved, the state grants a charter

orarticles of incorporation. The articles of incorporation formally create the corporation.^2

The corporate management and board of directors then prepare a set of bylaws, which

are the rules and procedures for conducting the corporation’s affairs.

The Responsible Board

Recent accounting scandals, such as those involving Enron,
WorldCom,andFannie Mae,have highlighted the roles of
boards of directors in executing their responsibilities. For ex-
ample, eighteen of Enron’s former directors and their insurance

INTEGRITY, OBJECTIVITY AND ETHICS IN BUSINESS

Corporation State of Incorporation Headquarters

Caterpillar, Inc. Delaware Peoria, Ill.

Delta Air Lines Delaware Atlanta, Ga.

Dow Chemical Company Delaware Midland, Mich.

General Electric Company New York Fairfield, Conn.

The Home Depot Delaware Atlanta, Ga.

Kellogg Company Delaware Battle Creek, Mich.

3M Delaware St. Paul, Minn.

RJ Reynolds Tobacco Delaware Winston-Salem, N.C.

Starbucks Corporation Washington Seattle, Washington

Sun Microsystems, Inc. Delaware Palo Alto, Calif.

The Washington Post Company Delaware Washington, D.C.

Whirlpool Corporation Delaware Benton Harbor, Mich.

Exhibit 2

Examples of

Corporations and Their

States of Incorporation

2 The articles of incorporation may also restrict a corporation’s activities in certain areas, such as owning

certain types of real estate, conducting certain types of business activities, or purchasing its own stock.

© DAVID T. PHILLIP/AP WIDE WORLD PHOTO

providers have settled shareholder litigation for $168 million,

of which $13 million is to come from the directors’ personal

assets. Board members are now on notice that their directorship

responsibilities are being taken seriously by stockholders.