Business Law 1 Fiduciary Duties Research Assignment (Essay Sample)
Jimmy is the CEO of News Corp. His son, Johnny, runs Television Inc. One day Jimmy suggests that Johnny sell Television Inc. to News Corp. Jimmy and Johnny work together to radically inflate the value of Television Inc. Jimmy brings a proposal to the Board of Directors to buy Television Inc. for $500 million dollars even though the corporation is only worth $2 million. The board of directors diligently examines the transaction, but due to clever forgeries, the board does not discover the radical inflation of the corporation. Jimmy never discloses his relationship with Johnny. The sale goes through, and it is shortly discovered that Television Inc., is practically worthless.
A shareholder sues alleging that Jimmy violated his fiduciary duty of loyalty.
Additionally, the shareholder claims that the board of directors violated their fiduciary duties of care.
Is the shareholder correct?
The requirements below must be met for your paper to be accepted and graded:
Write between 500 – 750 words (approximately 2 – 3 pages) using Microsoft Word.
Attempt APA style, see example below.
Use font size 12 and 1” margins.
Include cover page and reference page.
At least 60% of your paper must be original content/writing.
No more than 40% of your content/information may come from references.
Use at least two references from outside the course material, preferably from EBSCOhost. Text book, lectures, and other materials in the course may be used, but are not counted toward the two reference requirement.
Reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) must be identified in the paper and listed on a reference page.Reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) must come from sources such as, scholarly journals found in EBSCOhost, online newspapers such as The Wall Street Journal, government websites, etc. Sources such as Wikis, Yahoo Answers, eHow, etc. are not acceptable.
Business Law 1 – Fiduciary Duties
Your Institution of Affiliation
May 25, 2017
According to the Legal Information Institute (n.d.), fiduciary duty or duty of loyalty, is the principle with which any board, director, or officer of a company must uphold, where any of the decisions that they make must be for the company’s best interests and not for their or their families’ personal economic interests. Based on this definition, it could easily be argued that what Jimmy did, was definitely a violation of his duty of loyalty towards News corp. More specifically the violation that he did was (1) because buying Television Inc. is most probably intended to save his son’s company, instead of good intentions of bringing positive investments towards News Corp., and (2) because his act of radically inflating the value of the company posed a great risks towards the bankruptcy of News Corp. This case according to the National Paralegal (n.d.) is called as an “interested director transaction”, because a director or a high ranking officer used his own influence and the company’s resources that he has, in order to secure that the transaction would push through. However, in court, a breach would only be defined if Jimmy wouldn’t be able to justify why the transaction was fair starting from the time that they presented it, until the time that it was brought into court.
In the case of the board of directors, I believe that the shareholder’s claim that they violated the “d...
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