Question

Mitch is a director and officer of Numero Uno, Inc. Mitch makes a marketing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders. The shareholders accuse Mitch of breaching his fiduciary duty to the corporation. What is Mitch’s best defense against this accusation? Later, the Numero Uno board considers a resolution for the firm to compete with One-of-a-Kind Corporation. Mitch is a director and shareholder of One-of-a-Kind. What is Mitch’s responsibility in this situation?

Answer 1

answer-

Yes, It is Fiduciary duty of director to make decisions which leads to benefit of the organization but no one can exactly predict the outcomes of thier decision. In this case, Mitch can use Business jdugement rule as defense in which He can say that His decision was taken in good faith for benefitting the company.If his decision was illegal then he was not protected but since Marketing decision is not ilegal and taken in good faith an best interest of the company.Such type of decisions are common in business.

In second scenario, When a person sits on boards of diretors's chair in two companies competing which each other then it creates conflict of interest situation. As director, It is Mitch's fiduciary duty to first inform this to both members of boards then resign from the position of either Numero Uno or One of a kind.He can not serve to both organization.