Misconduct: Brehm V. Eisner

Corporate misconduct should be preempted and must start from within the individual company’s leadership and trickle down. No matter how much regulation you have in place, if it is the intent of a CEO or other top leader in a given company there is very little regulation will do to prevent misconduct. As the saying goes rules are made to be broken unless from within a company there exists a robust infrastructure of ethical organization that is self-sustaining. In my view there seems to be a sway towards protecting corporate executives before protecting the stakeholders in a company. Having said that, the rationale for the business judgment rule is the recognition by courts that, in the inherently risky environment of business, boards of directors …show more content…
There is little accountability for corporate directors to shareholders, although some still exists. For example, a director for Disney was let go after 14 months of work with about $150MM in compensation, more than his entire employment contract. In Brehm v. Eisner, the Court found that the Business Judgment Rule shielded the Board, which the Court found to have exercised bad business judgment, since it essentially complied with the Van Gorkom procedural requirement of informing themselves via an expert before approving the severance package. And so the rule seems to safeguard even abhorrent business decisions from judicial review. The other side of that argument is that stakeholders are free to sell their stocks in the open market at any given moment. Given, some poor business choices by the board may very well affect the shareholders' ability to do so. Answer no there is not enough protection as it stands for stakeholders to prevent corporate misconduct in my …show more content…
That trusting the markets can only work for so long in comparison to automobile drivers being told that there would be no more tickets issued or akin to job applicants knowing that there would be no drug testing or the IRS letting all people know that they would not be conducting audits any longer. I believe it depends and would be very difficult give a blanket answer to say yes we do or no we do not need more regulation. There have been and will continue to be many times where business and government are at odds but the government has also been a friend of business, helping companies large and small in numerous ways. The SBA for example is an agency looking to help small business in the form of loan for entrepreneurs, the patent and trademark office looks to protect inventions and certain products from illegal infringement by competitors, therefore encouraging innovation and creativity in the business