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huck4 huck4
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6 years ago
A QUESTION OF ETHICS
  McQuade was the manager of the New York Giants baseball team. McQuade and John McGraw purchased shares in the National Exhibition Co, the corporation that owned the Giants, from Charles Stoneham, who owned a majority of National Exhibition's stock. As part of the transaction, each of the three agreed to use his best efforts to ensure that the others continued as directors and officers of the organization. Stoneham and McGraw, however, subsequently failed to use their best efforts to ensure that McQuade continued as the treasurer and a director of the corporation, and McQuade sued to compel specific performance of the agreement. A court reviewing the matter noted that McQuade had been shabbily treated by the others but refused to grant specific performance on the ground that the agreement was void because it interfered with the duty of the others as directors to do what was best for all the shareholders. Although shareholders may join to elect corporate directors, they may not join to limit the directors' discretion in managing the business affairs of an organization; the directors must retain their independent judgment. Consider the implications of the case and address the following questions.
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6 years ago
A QUESTION OF ETHICS
1. All directors of a corporation owe their primary fiduciary duty to the corporation. Consequently, they must use their good faith judgment to make decisions that they believe will benefit the interests of all the shareholders. As such, their duty to the corporation necessarily takes precedence over any promises they might make to their fellow directors concerning matters that do not directly benefit the corporation's other shareholders. It might be more un-ethical to permit several directors of a corporation to enforce various promises made to each other even though these promises do not benefit the corporation itself or can be performed only at the expense of the other shareholders.
2. Corporate directors cannot serve two masters at the same time if they expect to guide the affairs of the corporation competently. By forcing directors to ignore private agreements that they may have with other directors or officers and to concentrate instead on running the company to the best of their ability, most potential problems associated with attempting to serve both the shareholders and other directors simultaneously can be avoided.
3. If several incompetent directors were attempting to exclude other, more competent directors from actively managing the corporation's affairs, then it might be in the interests of the shareholders to seek to hold the incompetent directors to a prior agreement made with the other directors in which all the signatories promised not to do anything that would prevent any one of them from carrying out his or her duties.
huck4 Author
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6 years ago
I just wanted to write to say thanks a bunch for the answer!
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