Problem: Jimmy is the CEO of News Corp. His son, Johnny, runs Television Inc. One day Jimmy suggests that Johnny sell Television Inc. to News Corp. Jimmy and Johnny work together to radically inflate the value of Television Inc. Jimmy brings a proposal to the Board of Directors to buy Television Inc. for $5 million dollars even though the corporation is only worth $1 million. The board of directors diligently examines the transaction, but due to clever forgeries, the board does not discover the radical inflation of the corporation. The sale goes through, and it is shortly discovered that Television Inc. is, in fact, only worth $1 million.
- A shareholder sues to allege that Jimmy violated his fiduciary duty of loyalty.
- Additionally, the shareholder claims that the directors violated their fiduciary duties of care.
- Is the shareholder correct? Explain why you think they are or are not correct.
- This is in reference to Business Law Fiduciary Duties