LAW 5a CASE STUDY and Questions

Law Case Study Name: Institution: Question 1: How do the duty of care and the duty of loyalty govern the conduct of directors and officers in a corporation?  Much of the work that directors do in the corporations involves a lot of decision making. The duty of care provides the standard code of conduct, for each and every director and officer. This duty binds the directors and the officers to make sure that when they make decisions, it is in good faith, it is informed and most rational. Misfeasance and nonfeasance are the two situations that lead to the duty of care (HYPERLINK "/search?tbo=p&tbm=bks&q=inauthor:%22Bruce+S.+Butcher%22&source=gbs_metadata_r&cad=6"Butcher, 2000). Misfeasance is the case where the director or the officer in question, makes a decision knowingly, which ends up hurting the corporation or the share holders. While nonfeasance, is a case when a director does not make a decision or does not act, in a situation that even the lower class employees would have acted upon. Put in other words if the director neglects his/her duties as a director he/ she is guilty of an offence. However, there is a catch; the negligence to act must lead to an actual injury, either to the company or the shareholders. The board of director and officers are also bound by the duty of loyalty to the company. So as to safe guard the decisions that the directors make, the duty requires them to act in the best interest of the company and not themselves (Clarkson, Jentz, Cross & Miller, 2010). The duty of loyalty, binds the directors from self-dealing, while making decisions that pertain to the company. That way the directors cannot act in a selfish manner. This is to make sure that the directors maintain their loyalty to the company and all the decisions that are made safe guard the company’s best interests. Question 2: What are the rights of the shareholders of a corporation? Shareholders have several rights that give them the power in the company the...