In your text materials you have looked at the Business Judgment Rule, which generally protects corporate officers and directors from personal liability for company losses resulting from good faith errors of judgment. This concept is discussed on pages 1169-1170 of your text.
Please consider the following scenario:
Mr. Carlson manages a radio station in Cincinnati, Ohio. His formal job title is President of WKRP Radio Corporation. Carlson is eager to take a more active role in the business and demonstrate to the shareholders his innovative management style.
Carlson develops a promotional idea for the struggling radio station. He intends for the station to sponsor, organize and run a Thanksgiving Turkey give-away. The event is to take place at a local shopping mall a week before the holiday.
He extensively researches the laws on promotional give-aways and any regulations that might apply. Carlson also commissions a market research study, which indicates this promotion should be received exceptionally well by its target audience.
Rather than a boring give-away of frozen turkeys to customers standing in a line outside the mall, Carlson believes the more exciting course of action would involve giving away live birds via helicopter to the waiting crowd below. His sales director and yes-man Herb Tarlek is very enthusiastic as well, believing the promotion will set the station apart from its competitors. Carlson plans the promotion down to the last detail.
The promotion draws a record crowd. Tragedy strikes when the turkeys are actually dropped. Sadly, the domesticated birds are too heavy to fly (particularly from the altitude of the helicopter). The result is catastrophic.
Please write a response applying the business judgment rule to this situation to protect Carlson from personal liability to the WKRP Corporation for this incident. A complete response should do the following:
- Identify the requirements for the business judgment rule to apply
- Apply the business judgment rule to this situation
- Make the best case the business judgment rule would apply
- Make the best case the business judgment rule would not apply
- Give your opinion on whether or not the rule should apply
- Clearly support and explain your belief
[1]
For a more complete factual recitation, this problem can be found on WKRP in Cincinnati, Season 1, Episode 7 “Turkeys Away.” Available on Hulu and Youtube. Not required in any way for your answer.
https://youtu.be/4FXSnoy71Q4
https://youtu.be/p00nBSNIPwg