The directors of Kmart,Inc.voted several years ago to approve a new marketing plan that involved endorsements by Martha Stewart of Kmart home products such as linens,paint and decorations.Marketing studies have shown that Martha Stewart was not the right match for endorsements for Kmart's customer base.Kmart is now in Chapter 11 bankruptcy.Its shareholders believe the Martha Stewart decision was the cause of the company's demise.
A)The shareholders have a cause of action against the directors for violation of the business judgment rule.
B)The shareholders have a cause of action against the directors for violation of the corporate opportunity doctrine.
C)The shareholders can have the court order the directors removed for cause.
D)The directors of Kmart are protected under the business judgment rule.
E)none of the above

Question

Quizplus · Accepted Answer

The directors of Kmart are protected under the business judgment rule, which shields directors from liability for decisions that turn out poorly if those decisions were made in good faith, with the care that an ordinarily prudent person would take, and with the belief that they were acting in the best interests of the corporation. The decision to endorse Martha Stewart, even if it was a mistake, falls under this protection as long as it was made with due diligence and in the company's perceived best interest at the time.

The Directors of Kmart,Inc