1. If the corporation’s officers have carefully covered up the wrongdoing, is it still fair to hold directors liable for failing to detect the illegal activities?
2. Is it ethical for directors to include a waiver of liability for shareholder suits in their corporate charter? Is it sound public policy for courts to recognize a limited liability provision in a charter? Why or why not?

McCall and other shareholders brought a derivative suit against Scott and all other officers and directors of Columbia, a healthcare corporation, alleging breach of fiduciary duty claims. The shareholders claimed that the board had intentionally and/or recklessly disregarded fraudulent activities of senior management, including management’s attempt to improperly boost revenue through systematic overbilling for a period of two years. The directors defended by citing a limited liability provision in their corporate charter that limited the liability of the directors in the case of an allegation of the breach of duty of care so long as they did not act in bad faith.

  • CreatedNovember 06, 2014
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