Question

1.

Brian is the Chief Financial Officer of the Hamilton Corporation. He made a difficult business decision which ended up losing millions for the corporation. When challenged about his decision, the court ruled he had not acted in good faith. According to the business judgment rule:

Brian will have to resign from the company.

Brian will only be held personally liable if he breached a duty of loyalty or a duty of care.

Brian will be held personally liable for the loss.

Brian will not be held personally liable for the loss.

2.

Shane is a Chief Operating Officer for JNJ Enterprises. He also sits on the Board of Directors. He is known as what kind of director?

zombie

inside

internal

independent

Answer 1

1. Option C.

• A business judgement rule is a rule that supports the business owners or any stakeholders if they have taken any decisions that was unwise and has brought a huge loss to the organisation, but it still defers them from punishment if they have taken this decision with a good faith and without any personal intentions.
• Here Brian has made a very difficult decision which lead to the loss of millions for the corporation. The court accused him for not acting in good faith.
• Then according to this rule, Brian will be held personally liable for the loss.

2. Option B.

• Inside directors are those directors who may be a direct stakeholder of a company or an employee or an employer, but they also act as a board member due to their sense of duty.
• Shane, who is a chief operating officer, also sits on board of directors, hence he is known as an inside director.