Kris, a shareholder of E-Max, Inc, claimed that the business was being mismanaged. Kris notified the board of directors that the corporation has been wronged and asked the board to bring suit in the name of the corporation directly. In response to Kris' demand, what actions may the board take? What could Kris's response be to each alternative?
The board has three choices:
1 . It can agree with the shareholders and file suit on behalf of the corporation. In this case, the shareholders cannot bring their own derivative action.
2 . The board can reject the demand or fail to respond. To proceed with a derivative suit, the plaintiffs must convince the court that the board has violated the business judgment rule.
3 . The board can appoint a Special Litigation Committee. If the SLC determines that the lawsuit is without merit, the court must generally dismiss the case unless the shareholders can show the rejection was uninformed or not in good faith.
You might also like to view...
What is motivation, and why is it important for managers to understand how motivation works? What do managers need to motivate people to do?
What will be an ideal response?
A properly designed and administered structured interview ensures that the questions are ______.
a. asked of some, but not all candidates b. job related c. scored using weighted averages d. evaluating and employees potential, not their past experience
Which of the following outcomes of differentiation makes it a viable strategy for meeting
financial objectives? A) the requirement to find new sources of raw material needed for differentiated products B) a reduction in market size, as differentiated products appeal only to a niche market C) an increase in efficiency as companies gain experience D) the willingness of a customer to pay a higher cost for a perceived difference
Food product manufacturers are required to list the number of calories at the top of the nutrition panel. Posting calorie information is an example of meeting the ________ requirements of labeling.
A. customer B. marketing C. industry D. legal E. aesthetic