Kaleb is the CEO of Sports City, a sporting goods store. Kaleb wants to increase the sales of Sports City. Kaleb researches the market and discovers that boat sales are soaring, so Kaleb decides to add a line of boats to the inventory of Sports City. Kaleb finds what he believes is a great deal on fishing boats with Fisherman’s Boat Supply and enters into a contract for $90,000 worth of fishing boats. During the first year after the fishing boats are delivered to Sports City, only one boat sells. Sports City suffers an $85,000 loss on the deal. If the board of directors tries to hold Kaleb personally liable for the loss:

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Gabs2343 Gabs2343

19-09-2022
Business

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Kaleb is the CEO of Sports City, a sporting goods store. Kaleb wants to increase the sales of Sports City. Kaleb researches the market and discovers that boat sales are soaring, so Kaleb decides to add a line of boats to the inventory of Sports City. Kaleb finds what he believes is a great deal on fishing boats with Fisherman’s Boat Supply and enters into a contract for $90,000 worth of fishing boats. During the first year after the fishing boats are delivered to Sports City, only one boat sells. Sports City suffers an $85,000 loss on the deal. If the board of directors tries to hold Kaleb personally liable for the loss:

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ewomazinoade ewomazinoade · Answer 1 · 2022-09-20T17:48:07+02:00

If the board of directors tries to hold Kaleb personally liable for the loss they will not be successful, because Kaleb will be protected by the business judgment rule.

What is the business judgment rule?

The business judgment rule is a rule enacted to prevent the board of directors or the owner of a company from frivolous lawsuits. The business judgment rule is well known in common law countries.

According to the business judgment rule, the owner or the board of director cannot be taken to court if it is proven that the owner acted in good faith of their stakeholders.

Kaleb entered into the contract because he beleived that it would be a great deal and increase the shareholder's value by increasing the revenue of the company. The fact that the business earned a loss in the first year does not mean that Kaleb did not act in the best interest of the shareholders. Also, the fact that the business earned a loss in the first year does not mean that the business would not make profit in subsequent years.

Here are the options:

A. they will not be successful, because Kaleb will be protected by the business judgment rule.

B. they will not be successful, because as CEO, Kaleb has the ultimate authority to make any decision he chooses about the company and cannot be held responsible even for a careless decision.

C. they will be successful, because Kaleb violated his duty of loyalty to the company.

D. they will be successful, because Kaleb violated his duty of care to the company

To learn more about business judgment rule, please check: https://brainly.com/question/14215472

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