Class_12&13_Corporations_bb

Class_12&13_Corporations_bb - Corporations Business...

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Corporations Business Organizations
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Duty not to Waste Regulates decisions that destroy corporate assets Duty of Care Regulates thoroughness and diligence in deliberations. Duty of Loyalty Regulates self- dealing transactions by management. Duty of Good Faith Regulates indifference toward corporate welfare. Mgt/Bd Shareholder s Fiduciary Duties CORP. BUSINESS JUDGMENT RULE
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Business Judgment Rule (BJR) What Is It? A legal presumption that a corporate fiduciary has endeavored in good faith to exercise care in carrying out her duties in corporation’s interest Places burden on party complaining of breached fiduciary duty to overcome it Preconditions Exercise of judgment Disinterested and independent decision-makers Absence of fraud or illegality
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B U S IN E J D G M N T R L Duty of Loyalty Corp. Fiduciaries Disgruntled SH For DoL cases, the BJR is inapplicable (also true for knowlingly illegal actions)
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Corp. Fiduciaries B U S IN E J N T R L Duty of Loyalty For DoL cases, the BJR is inapplicable (also true for knowlingly illegal actions) Waste/DoC/GF Disgruntled SH D G For other cases, πλαιντιφφ must “blast through” BJR: waste; duty of care; duty to act in good faith
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Business Judgment Rule Who gets the benefit of the BJR? Generally, all corporate fiduciaries (board members, executives, dominant shareholders) What is the rationale? Court’s competence in second-guessing business decisions Danger of directors & officers being too risk- averse
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Win 2/3 1/3 Los e Win 1/3 2/3 Los e Mgr. A B BJR and Decisions under Risk and Uncertainty
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Mgr. A BJR and Decisions under Risk and Uncertainty
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Mgr. A BJR and Decisions under Risk and Uncertainty BJR: courts are more willing to scrutinize the decision-making procedure rather than its substance
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Shlensky v. Wrigley Chicago National League Ball Club (majority shareholder - Philip Wrigley) refused to install lights at Wrigley Field. Shlensky (minority shareholder) brings derivative action for damages and order compelling installation. Held: Affirms dismissal of complaint. Business Judgment Rule
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Court’s holding “courts of equity will not undertake to control the policy or business methods of a corporations although it may be seen that a wiser policy might be adopted and the business more successful if other methods were pursued.” “…it is not (the court’s) function to resolve for corporations questions of policy and business management. The directors are chosen to pass upon such questions and their judgment, unless
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Does Wrigley’s resistance to lights seem a sensible way to maximize profits? If not, why isn’t this SH suit successful?
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This note was uploaded on 10/18/2011 for the course LAW 700 taught by Professor Kim during the Spring '10 term at USC.

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Class_12&13_Corporations_bb - Corporations Business...

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