Shareholder Derivative Action

The video explains the accountability of corporate officers and directors to shareholders, focusing on fiduciary duties and derivative liability. It discusses the business judgment rule, which protects officers and directors if they use reasonable judgment in decision-making. Shareholders can sue if officers or directors act recklessly or intentionally harm the corporation.

What is the primary role of officers and directors in a corporation?

• To manage daily operations and make large-scale decisions

• To act solely on their own behalf

• To ensure maximum profit for themselves

• To avoid any form of accountability

What is derivative liability in the context of corporate governance?

• A method for directors to avoid responsibility

• A rule that protects shareholders from losses

• A process where shareholders sue officers or directors on behalf of the corporation

• A situation where officers sue shareholders

What does the business judgment rule protect?

• Directors and officers from liability if they use reasonable judgment

• Employees from being fired without cause

• Shareholders from any losses

• Corporations from being sued by competitors

Under what condition can shareholders successfully sue directors or officers?

• If the directors or officers act recklessly or intentionally harm the corporation

• If the directors or officers make a decision that benefits the corporation

• If the directors or officers follow the business judgment rule

• If the directors or officers increase shareholder value

What must be proven for a derivative action to be successful?

• That the directors or officers acted with reasonable care

• That the directors or officers were reckless or intentional in their harmful decision

• That the corporation made a profit

• That the shareholders were unaware of the decisions