Distanet Corporation and Telenex Corporation are competitors in the gaming accessories market. Telenex has been the market leader for over five years. After examining the price and sales data of products from both companies and consulting an economist and an accountant, Distanet's directors vote for a reduction in price of Distanet's products. They believe that reducing prices would make the company more competitive. The decision to reduce prices does not improve sales significantly. In fact, Distanet's revenues decrease as a result of the decision. Aileen, a stockholder of Distanet, seeks to hold Distanet's directors liable for the failure of the plan to improve Distanet's position in the computer market and for the losses experienced by the corporation as a result of the implementation
of the plan. Will she succeed in her suit?
A. Yes, because shareholders are permitted to sue to allow a court to determine whether the directors have acted in the best interests of the corporation.
B. No, because the directors are the managers of the corporation.
C. No, because the directors' decision is subject to the business judgment rule.
D. Yes, because the directors are liable for any business-related financial loss sustained.
Answer: C
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