MANAGMNT 260 Lecture Notes - Lecture 13: Consumer Protection
23 Jan 2017
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Shareholders: the board - derivative sues (board suing the company for bad judgement) There is a board business judgement rule: if they passed a judgement that hurt the shareholders, they can sue saying that they had a bad judgement rule. Securities laws: focus on disclosures - the board knew or lied about what they knew which ultimately hurt the shareholders. Fraud: companies lie to consumers about their products. Sellers do not have to disclose problems, however they cannot lie. Disclosure of a known defect that could result in fatal accidents could be required to disclose from other consumer safety laws. Trying to value the cost and the benefits in an accurate way for cost-benefit analysis. You don"t really know what is going to happen, it is your best guess. Companies don"t accurately access the likely damage of something to happen. They forget that they have to bear the cost of the recall and market share loss.
