Reference no: EM133681811

Question

Roger is a director of a major car manufacturer. This is one of the few remaining car companies yet to introduce a sport utility vehicle. Roger convinces the board to investigate forming a new division to design, build, and market a sport utility vehicle. Roger also convinces the board that the first sport utility vehicle that the division introduces should be the largest yet sold to the general public.

The board set up a committee to do some research, and this committee hired a marketing consulting firm. The committee and the consulting firm both had a few reservations about such a large vehicle, but the data showed that the market could most likely support it. After much discussion, the board of directors voted in favor of creating the new division and the huge sport utility vehicle as its first product. The vote was 9 to 6 in favor of the plan.

Shortly before this vehicle was introduced, there was a major oil supply disruption that caused the price of crude oil to nearly triple. Few purchasers were found for the huge new sport utility vehicle and the company lost considerable money. A shareholder filed suit against Roger claiming he violated his duty to the corporation by convincing the board to build and market the large SUV.

Using IRAC discuss the duties and defenses a director, here Roger, has to a lawsuit.