Roger's Duty Case Study

Decent Essays
Roger’s Duty as Director and His Potential Defense Roger is a director for the car manufacturer. As such, he is an agent of the car manufacturer and has a duty of care, a duty of loyalty, and a duty to exercise reasonable supervision. It is only stated that Roger is a director without further explanation of his full responsibilities. His idea did require meeting with the board for approval and the board did vote in favor of Roger’s plan for a new division to manufacture a large sport utility vehicle.
The Role of a Director The role of a director typically includes: (1.) acting on behalf of the corporation and its best interests with an appropriate duty of care at all times (2.) acting with loyalty to the corporation and its shareholders
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There is no stated indication that anyone on the board had any personal interest or anything to gain if the division was started and the vehicle manufactured. They did the due diligence of research. The price of a huge sport utility vehicle could generate a healthy profit, especially if it offered the only option available for purchase. Therefore the board was acting in the best interests of the company and the shareholders by approving the new division as making a profit would be in the best interests of the shareholders. The vote of the board was in favor of the project with 9 to 6 vote, which means that some board members had reservations and voted against it. What prompted those reservations, what questions were brought up, or other concerns is not mentioned. Nevertheless, the board was exercising their approval based on their best…show more content…
Under this standard, a court will not second guess the decisions of a director as long as they are made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that they are acting in the best interests of the corporation (Cornell, nod). Roger and the board were acting in good faith, with care, and in the best interests of the corporation. They made an informed decision and there was no conflict between their personal interests and the company and its shareholders. Our textbook states that the court will not question whether the action was wise or whether the directors made an error of judgment or a business mistake (Bagley, 2016). At the time of the vote in favor of the new division, the board had to make a decision based on the facts in hand, not on any future speculation of the
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