1. Glen is a director and shareholder of Eagle Corporation and of Fine Products, Inc. A resolution comes before the Eagle board to compete with Fine Products. What is Glen’s responsibility?
I think that the director can not support any business that competes directly with the corporation that is on board. I believe that directors duty is to disclose the conflict of interest and the directory will have to makes sure in any circumstances or if anything changes, the director will have to resign from on of the boards. So I believe that Glen has the duty to inform about the fine products of Eagles intent to compete with them, so at the end if Fine Products and Eagle Corporations go into competitions then I believe that Glen wouldn’t be able to contain to be the director for both companies.
2. Todd is a director and officer of United Sales, Inc. Todd makes a market¬ing decision that results in a dramatic decrease in profits for United and its shareholders. The shareholders accuse Todd of breaching his fiduci-ary duty to the corporation. What is Todd’s best defense against this ac¬cu¬sation? Later, a resolution comes before the United board to compete with VeriFine Products, Inc. Todd is a director and shareholder of VeriFine. What is Todd’s responsibility in this situation?
I think the best defense here is would be the business judgment rule. Because as long as the director or officer does what has to done to stay informed and if they act in good faith, on what he or she may think could be in the best interest of the corporation and to think what another person would do being in the same circumstance. I think that he or she will not be hold liable because a decision has a negative result, unless there is evidence of bad faith that can be proved, unless it can be proven that Todd acted in bad faith and did try to cause the company harm he will be protected by the business judgment rule, that protects Todd from any liability of the bad business decision the he made. If there’s a resolution about the United sales, Ince to compare with Venfine Products Todd will no be able to be on board with either of the companies because it could cause conflict of interest.
3. Drew is an officer of Energy Fuel, Inc. Drew knows that an Energy engi¬neer recently developed a new, inexpensive method for converting hy¬dro¬gen into fuel. Drew takes advantage of this information to buy Energy stock from Gert and, after the discovery is announced, to sell the stock to Holly at a profit. Gert claims that this is a violation of federal law. Is Gert correct? If so, what federal law has Drew violated? If not, has Drew vio¬lated any law?
I think that the loyalty satates that the directors and officers can not usane the funds that belong to the corporate or use any confidenintial information for personal use, I believe some of the cases that deals with the duty of loyalty involve :
1. Competing with corporation
2. Taking personal advantage of an corporate opportunity
3. Having interest that conflicts with the interest of the company
4. Engaging with insider trading
5. Giving authorizing a company transaction that detriment to minority shareholders.
6. Selling control over the company
I believe that Drew violated the insider trading law because he had inside information from the energy fuel, that they made an inexpensive method for converting hydrogen into fuel. That made him purchase energy stock form Gert to make profit.
4. Standard Corporation is a public company whose shares are traded in public securities markets. Standard’s officers want to set up and main¬tain a system of “good corporate governance.” What is ” corporate govern-ance”? What is its practical significance? What, at a minimum, should a “good” system of corporate governance include?
Governance policies says that the rights and responsibilities of participants in corporation and spelling out rules and procedures for making decisions, any effective corporate governance can maybe considered practical significance that means that the corporations can have a better corporate governance by having a better accountability to investors, the investors can also have higher valuation than the corporation that has less concern about governance.
I think that a good system should include audited reports of any financial progress. This would be a great way to protect their shareholder, and this will also be a great way for the managers to evaluate the financial progress and they will have record of it all. Any one that breaks the law either by taking advantage of the shareholders can be and should be punished for having misbehavior.
Cengage Advantage Books: Business Law Today: THE ESSENTIALS
ROGER LEROY MILLER