As company ombudsman, your task is to investigate complaints of wrongdoing on the part of corporate directors and officers, decide whether there is a violation of the law, and deal with the wrongdoers accordingly, Jane, a shareholder of Goodly Corporation, alleges that its directors decided to invest heavily in the firm's growth in negligent reliance on its officer's faulty financial reports. This caused Goodly to borrow to meet its obligations, resulting in a drop in its stock price. Are the directors liable? Why or Why Not?
To determine whether the directors of Goodly Corporation are liable for the alleged wrongdoing, an investigation needs to be conducted. As the company ombudsman, your role is to gather relevant information and analyze it to make a determination. Here are the steps you can follow:
1. Review the complaint: Take the time to thoroughly understand the complaint made by Jane, the shareholder of Goodly Corporation. Identify the specific allegations against the directors and the basis for their liability.
2. Examine financial reports: Obtain copies of the financial reports in question and assess their accuracy and reliability. Look for any signs of negligence or intentional misconduct by the officers responsible for preparing these reports.
3. Evaluate director's actions: Investigate whether the directors were aware of the faulty financial reports and whether they relied on them when making the decision to invest heavily in the firm's growth. Review board meeting minutes, communications, and any other relevant documentation.
4. Assess duty of care: Determine whether the directors exercised due care and diligence in fulfilling their duties. Directors have a duty to act in the best interests of the corporation, which includes making informed decisions based on accurate information.
5. Consider causation: Analyze whether the decision to invest heavily in the firm's growth, based on faulty financial reports, directly caused the borrowing and subsequent drop in the stock price. Assess whether this harm was reasonably foreseeable.
6. Consult legal counsel: Seek guidance from the company's legal department or external counsel experienced in corporate law to ensure compliance with applicable laws, regulations, and corporate governance principles.
Based on these investigations, you can then make an informed determination regarding the potential liability of the directors. It is important to approach the investigation impartially and rely on factual evidence to avoid any bias or prejudice in evaluating the directors' actions.