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...

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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

Answered 1 days AfterJun 14, 2021

Answer To: In your text materials you have looked at the Business Judgment Rule, which generally protects...

Ayushi answered on Jun 15 2021
142 Votes
1
Business Judgment Rule
Contents
Business judgment rule    3
Requirements for applying the business judgment rule    3
Business
judgment rule to the current situation    3
Best case business judgment rule would apply    3
Best case business judgment rule would not apply    3
Opinion    4
References    5
Business judgment rule:
The business judgment rule is based on an assumption that the directors of any company work and take decisions in the best interest of the company instead of acting in their own interest and take every action by keeping the benefit of shareholders of the company in mind (Sharfman and Bernard). This rule says that if any director of the company has taken any decision in good faith of the company and such decision lead to any unpredicted losses or bad circumstances then such director is not liable to bear any loss personally.
Requirements for applying the business judgment rule:
There are certain requirements like the directors have taken any action on an informed basis, and have performed in good faith and with a honest and true belief that every action taken by the directors is in the best interest of the company and the shareholders (Elson, Charles and Craig Ferrere). All these are required to be present or such actions should have taken place for...
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