COMM 315 Lecture Notes - Lecture 4: Business Judgment Rule, Bernard Madoff, Fiduciary

• School: Concordia University
• Department: Commerce
• Course: COMM 315
• Professor: Frank Crooks

Document Summary

Duty of loyalty of directors: legal and ethical obligation. Corporations should supplement legal obligations with rules of corporate governance: provide a path for ethical decision-making. Directors must avoid prioritizing interests of one or several shareholders over others or the company. Interests of company supersede the interests of shareholders. When interest of shareholders and company conflict: di(cid:396)e(cid:272)to(cid:396)s (cid:373)ust (cid:373)ake a (cid:862)(cid:396)easo(cid:374)a(cid:271)le de(cid:272)isio(cid:374)(cid:863) i(cid:374) the (cid:271)est i(cid:374)te(cid:396)est of (cid:272)o(cid:373)pa(cid:374)(cid:455) Fraud or gross negligence are not the only threshold. Business judgment rule: no lia(cid:271)ilit(cid:455) fo(cid:396) (cid:862)(cid:272)o(cid:373)(cid:373)e(cid:396)(cid:272)iall(cid:455) (cid:396)easo(cid:374)a(cid:271)le(cid:863) de(cid:272)isio(cid:374)s, based on fact, not (cid:396)e(cid:395)ui(cid:396)ed to (cid:373)ake a (cid:862)pe(cid:396)fe(cid:272)t(cid:863) de(cid:272)isio(cid:374, must not reject a better, available alternative. Repap decision: court overturned golden parachute (huge severance package) contract which the board granted ceo. 316 not someone on the outside, money disappears from company itself. Directors, senior officers, founders, participating shareholders: liable for damages, non-participating members still liable if they profited. Any interested person may apply for this remedy: shareholders, trustee, creditor.