Directors Have a Duty to Care and Therefore Can Be Held Responsible for Officers Falsefying Finacial Documents

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1 Terry Wilcox The Lack of Our Directors Duty to Care Week 8 – Individual Work 1 Everest University December 6, 2013 2 I am the company ombudsman and my job entails investigating complaints of wrongdoing on the part of the corporate directors and officers. It is also my job to decide whether there is a violation of the law and deal with the wrong doers accordingly. Jane, one of our shareholders, alleges that our director’s decided to invest in the firm’s growth relying heavily on negligently relied upon officers’ faulty financial reports. This caused Goody to borrow to meet its obligations, resulting in a drop in its stock price. In a corporation a board of directors are usually hired by shareholders every 1 to 3 years and it is the responsibility of the directors to make sure they exercise duty of care and duty of loyalty. The board of directors may elect officers to do some of their functions, but are not relived of there over all fiduciary responsibilities. In this essay I will cover what duty of care and loyalty are, why the board of directors should be held liable, if they can be pardoned by the Business Judgment Rule, and what the directors and officers should have done as well as what shareholders rights are. Directors and officers are both fiduciaries of businesses/corporations and it’s their obligation, ethically and legally speaking, to fulfill those obligations as they owe those duties to the corporation and shareholders. Directors and officers owe duty of care and duty of loyalty to not only the company, but to the shareholders as well. Duty of care is where officers and director are both expected to act in good faith and in the best interest of the

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