Question

4. ted is the president of soprano corporation (sc). ted decided to have sc manufacture large, gas-guzzling suv automobiles just before gasoline prices rose dramatically. as a result, sc lost billions of dollars. the shareholders of sc want to sue ted for this bad decision that cost them billions. however, ted made a reasonable investigation before making this decision, he had a rational basis for it, and he had no conflicts of interest regarding this decision. what would be the probable outcome if the shareholders file a suit?

Answer 1

The probable outcome if the shareholders file a suit would be Ted is not liable under the business judgment rule.

A legal principle known as the "Business Judgment Rule" aids in protecting a corporation's board of directors (B of D) from baseless legal claims over how it conducts business.

The rule, which is a cornerstone of common law nations, holds that boards are presumptively acting in "good faith," or in accordance with the fiduciary principles of loyalty, caution, and care directors due to stakeholders. The courts will not review or contest the board's decisions in the absence of proof that the board has flagrantly broken some code of conduct.

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