: Identification of Issues
COLORADO STATE UNIVERSITYCOLLEGE OF BUSINESS
BUS660 – Term Paper – Due March 8, 2017 by 11:59pm Mountain Standard Time
Overall Instructions: There are three distinct parts to your paper. These three parts should all be in one file when you submit them and you should start each part on a new page. In Part 1 you must read the fact situation below and identify and clearly state the issues presented. Part 2 provides two legal issues and you must write a one page “legal memo” on each of them. For Part 3, you will write about your own personal approach to leading an ethical organization.
Points will be allocated as follows:
Part 1 (11 total points)
Identification of Issues (8 points)
Clarity of Issue Statement (3 points)
Part 2 (10 total points)
Statement of Conclusion/Recommendation (3 points)
Analysis/Reasoning (7 points)
Part 3 (6 total points)
Overall Grammar/Style (3 points)
Part 1 – Fact Situation: Identification of Issues
Part 1 Detailed Instructions: You need to first read the Term Paper Assignment Background found in Canvas. The Term Paper Assignment Background provides the base information for this Term Paper assignment, but you are not asked to identify the issues in that background material. The fact situation below (starting with the numbered paragraphs) presents multiple legal and ethical issues. Your task for this part of the Term Paper is to identify the issues and provide a clear one or two sentence statement of the issue presented. An example from the Term Paper Assignment Background material would be “Did Sam Sneekin discriminate against Emily Ethical due to her female gender when he requested that she be removed from the distribution team? If so, was this discrimination a violation of ethical principles and U.S. employment law?” Notice that you don’t have to know all the facts, or the answer to the question, to state the issue. Also, you should list the issue even if you don’t believe there has been an actual violation of an ethical or legal principle. Each situation may raise multiple potential issues so give each issue separately. You should demonstrate that you can identify issues based on the ethical and legal materials we covered in class and the class readings.
For this section of the Term Paper, you will be graded on your ability to identify relevant issues and on how clearly you draft the issue in one or two sentences. Please draft your issues as “bullet points” and organize them using the outline given in the fact situation below. As with the Ethical and Legal Case papers, the best issue statements will be in the form of a question. Please focus on the key issues so that this part of your Term Paper is no more than three pages, single spaced.
Now, we pick up where the Term Paper Assignment Background left off…
Identify the three most critical issues that QP Legal is likely to raise regarding the below memo that was in the envelope that Sam gave to Bill. The memo looks like it is from a QP field representative in the country where the company is expanding.
“CONFIDENTIAL – DON’T PASS THIS ON TO ANYONE
February 1, 2017
Sam and Steve,
Wow, these people do business differently than we do! I have been able to talk with managers at a few potential customers already and every one of them is interested in what “incentives” we are going to offer to get their business. By this they mean what we are going to do for them personally, not what price discounts or delivery concessions we are going to offer their organizations. One guy even made it clear that he would buy our products with the right “incentives” even if we weren’t the best on price, quality and delivery times.
I think our strategy has to be to find the key guys and get them the incentives they want. This is usually just a weekend a month at a resort somewhere, a little bit of cash, or the like, something we can easily cover with the higher prices we can then charge. I’m told that these “incentives” are perfectly legal here, so we should be in the clear to move on this ASAP. I tried this out with one guy already and we have our first order for 2017! This international business stuff is really fun and we are going to make a killing here!
Bill left the meeting with Nouv very excited about his new role. He was working on an important special project for the new company owner and would really have a chance to show his leadership potential. This was a time for him to shine and he immediately started thinking about how he would shape the project and boldly lead the team to a whole new set of compliance requirements in the revised Code of Conduct. The next day he was already meeting with the head of Human Resources and Strategic Planning. “I need people on this team that can bring some fresh ideas.” Bill said. “I can’t have anyone that wants the same old approach.” Bill didn’t even notice when the HR and Strategic Planning managers raised their eyebrows and glanced at each other; he was too focused on how to drive this “Code project” forward. Bill continued,
“OK, I’ll need a team of four for this project and you have proposed 12 total candidates. (Bill) Four of your suggestions have been around way too long to have the fresh ideas I’ll be looking for so that leaves eight candidates. Of those eight, one is African American and one is Asian and that’s not the “image” I want for this project. Another one is a woman who just got married so she probably won’t stay with the company long enough to see the project to completion. One of the remaining five is someone who I know won’t go along with anything I… I mean the team… decides, so she’s out. The remaining four are my kind of guys, so we’re ready to go.”
The HR and Strategic Planning directors couldn’t even get a word in while Bill was talking and they were surprised when Bill wasn’t receptive to their input on how the project should proceed. “Nouv trusts me to lead this and with your four guys I’m sure I can get this one done quickly.” Bill insisted.
Sam Sneekin heard about his impending “release” from the company the day before his scheduled meeting with Nouv. He didn’t take the news well. He decided that he would leave a “legacy” at the company. In the course of 24 hours, he took the following actions:
QP had been involved in a patent infringement dispute with one of its competitors, Best Optics, Inc., for over a year. The case had already been through “document discovery” and a few depositions had been taken. Sam knew one of the senior managers at Best Optics and called him to discuss the case. Sam told him, “QP knows we infringed your patent and we are probably going to have to pay a large settlement. So far, we have been able to hide the evidence, but I can get it for you if you can get me a job at Best Optics if I ever need one.” Sam’s friend at Best Optics was excited about this news, especially since, as he said, Best Optics’ stock price on the New York Stock Exchange would go up significantly if Best Optics got a big settlement from QP. Sam’s friend accepted Sam’s offer and Sam sent the evidence to him by e-mail. Sam then picked up the phone, called his stock broker and placed an order for 5,000 shares of Best Optics stock.
Sam has been working directly with the new customer mentioned by Rick in the memo quoted above in QP’s new overseas market. The customer placed a large order for lenses that are normally used in larger rifle sights, but the customer didn’t say what they were going to use them for. Sam called the customer and verbally agreed to sell the lenses. The customer agreed and sent a fax confirming the terms of the sale based on the customer’s standard terms and conditions. Sam signed the customer’s documentation and ordered the lenses shipped before the end of the day.
Sam went to lunch with his secretary at about 1:00pm the day before his meeting with Nouv. He ordered a bottle of wine and, after a few glasses, told his secretary how much he admired her and that he could get her promoted if she would have dinner with him (she wasn’t aware that Sam would be leaving the company the next day). His secretary was not impressed by this offer and left immediately. Sam then took a seat at the bar and began to talk with the other patrons, while he drank several more drinks. As it turns out, one of the people eating lunch at the bar was a regular customer of QP. Sam loudly boasted that he could get anyone in the bar special pricing on QP products “for this afternoon only”. Although the customer could see that Sam was intoxicated, Sam insisted on selling a shipment of lenses to the customer at a discount. The customer finished lunch, went back to his office and confirmed the sale by fax, giving the quantity, delivery, price and other relevant details. Sam continued drinking in the bar telling the bartender that he needed to stay to make additional sales for QP. The bartender was only too happy to continue to give Sam drinks (some of them free) since Sam was being so entertaining. Sam’s “sales activity” ended when the bartender had to break up a physical fight between Sam and another patron. Sam came to his senses, apologized, and gave the other patron his QP business card saying “My company will take care of any damage I’ve done.” The other patron (who had a bloody nose and torn clothes as a result of the fight) took Sam’s card, left the bar and called his lawyer. Sam was almost home when he “blacked out” and ran his car into a school bus full of elementary school children seriously injuring several of them.
The next day, just before going into the meeting with Nouv, Sam sent an e-mail to all of his key industry contacts. The e-mail had jokes about racial and ethnic minorities, and women in the workplace and Sam closed the e-mail by saying “I read this and it reminded me of Beatty Brilliant! I hope you never have to deal with her. She’s the least truthful person I know.” Sam signed the e-mail “Sam Sneekin, VP Marketing, Quality Products, LLC”
After the meeting with Nouv, Sam was escorted to the door (without having any chance to collect his personal items) by the security guards that QP had hired as independent contractors as well as QP’s HR manager. The security guards (who had never liked Sam because of the way he had treated them) grabbed Sam by the arms and took him “the long way” so that most of QP’s employees could see what was happening. This was over Sam’s objections and took a fairly long time, much to the satisfaction of the guards and many of QP’s employees.
As you will recall, Sam Sneekin said that Emily Ethical was “dead weight”, but Nouv had her reinstated to the distribution team after she had raised ethical concerns about QP’s distribution strategy overseas. As it turns out, Emily had not been a very productive member of QP since she had been hired four years earlier. She consistently ranked in the bottom 25% of employees on her performance evaluations. Emily was “let go” about a month later. Nouv had been asked for a recommendation from a company Emily was applying to and Nouv said that “Emily was not our brightest star.” Emily didn’t get the job and she found out that there were two other female employees who had recently been fired from QP. Emily went to a lawyer to request that he file a class action lawsuit directly with the United States Supreme Court requesting compensatory, consequential, incidental, and punitive damages.
Nouv called an “emergency” Board meeting of QP for the week after his meetings with Bill, Betty and Sam. Five of QP’s seven Board members (including Nouv) were able to attend, even given this short notice. At the meeting,
Nouv told the Board that he had developed a personal relationship with a senior manager at Dependable Optics Associates, Inc. (“DOA”, a company traded on the New York Stock Exchange). “We’ve reached an understanding on the types of products we’re going to sell and to what customers, so we should start to see some better pricing for our products. This positions us much better to serve our respective customers going forward.”
Nouv described the bankruptcy of one of QP’s largest customers. The customer had been behind in its payments so QP extended credit to the customer in exchange for a security interest in the customer’s “general inventory”. Although the security agreement was signed, QP had not yet filed a UCC-1 statement. Nouv explained that this filing didn’t matter, since QP had a purchase money security interest in the lenses they sold to the customer as a result of this “general inventory” security agreement. Nouv also told the Board that “QP people are working with the customer every day to make sure we get paid first. I’m confident we’ll get all our money.”
Nouv told the Board about Sam’s departure and proposed hiring an additional person to help Betty with her expanded responsibilities. Nouv proposed two candidates: one had extensive marketing experience outside the U.S. in an unrelated industry while the other had experience with a direct competitor of QP. Nouv suggested to the Board the second candidate since “he can bring some competitive information in addition to his marketing experience.”
Nouv told the Board that he wants to make a deal with Apres Tomber, S.A. (ATSA), a French manufacturing entity, with a factory in Lyon, France, to manufacture QP’s line of fashion eyewear lenses for sale in Europe. Nouv said “I know the CEO of this company personally and we can count on her to produce the highest quality. We can also be assured that she won’t sell any of these lenses outside of Europe to undercut our prices in other parts of the world.” The Board sat quietly as Nouv explained that the relevant QP technology would be licensed to ATSA under the verbal agreement he had already reached with his ATSA contact.
Nouv told the Board that he wanted to make sure that QP controlled the distribution of QP’s products, and the pricing for those products, at least in the U.S. Specifically, Nouv wanted to make sure that QP’s independent distributors didn’t sell QP’s products for less than QP was selling them for so he told the distributors to maintain a certain minimum price. He also told the U.S. distributors that they couldn’t sell outside their own territories.
Finally, Nouv told the Board that QP had developed a new logo for the company to use in its marketing activities and that he had directed the company’s lawyers to file for patent protection to make sure the logo was protected.
When Nouv finished his presentation, the Board members didn’t see the need for any discussion. They had always just agreed with Nouv. The meeting ended with a general discussion on where to go for lunch.
Part 2 – Legal Memos
Part 2 Detailed Instructions: Write a “legal memo” to Nouv on the issues presented below. This memo is “legal” only because it is a summary of the general law that applies to the issue. You do not have to do any research beyond the class books and materials presented in class. Do not restate the facts. Your memo should start with the one sentence Issue identified for each situation. You should then state your Conclusion/Recommendation to the issue in one or two sentences. You should then give your Analysis/Reasoning, relating back to the course materials for support. Each of your two “legal memos” should be no longer than one page, single spaced.
You are QP’s General Counsel. Nouv has asked you to address the following issues so that he can be aware of the legal, and any potential ethical, implications:
a. QP is developing a new website that will include: (1) original art work created by third parties, (2) stories and other written materials contributed by customers and employees, (3) photos of employees working in QP’s facilities, (4) QP’s new “improved” logo, and (5) some innovative “click to learn more” features that no one else has ever thought about. Issue: What are the Intellectual Property implications for each of the website’s features? In particular, can they be protected by IP law, if so under what type of IP law, and who owns the IP in each element?
b. One of the special applications for QP’s products is in high end magnifying glasses. These magnifying glasses are intended for use in office settings where people have to read small text or look at detail in small drawings. Each magnifying glass is sold with a limited warranty (with disclaimers for the warranties of merchantability and fitness for a particular purpose) and a statement that the magnifying glass is “Intended for use indoors only.” As it turns out, the magnifying glasses can also be used to focus sunlight on objects outdoors. Focusing the sunlight like this allows a user to, for example, start a fire by focusing the sunlight on “kindling”. While playing with the magnifying glass in his back yard, Timmy (age 4) caused a severe burn to his eye as he attempted to “make the sun bigger” using QP’s magnifying glass. Timmy’s parents filed suit against QP. Issue: What is QP’s legal exposure under U.S. product liability theories for the damage to Timmy’s eye, and does QP have any legal or ethical duty to future purchasers/users of the QP magnifying glasses?
Term Paper Assignment Background
BUS 660 – 2017
Background on Quality Products, LLC: Quality Products, LLC (QP), our hypothetical company for the Term Paper Assignment, is a private company (meaning its shares are not traded on a public stock exchange) and primarily makes optical lenses. QP has two main product lines: lenses for fashion eyewear; and lenses for applications like cameras, binoculars, telescopes, and digital projectors. QP also sells lenses for specialty applications, like magnifying glasses and rifle scopes, but this isn’t the main focus of the business. QP’s lenses are considered the absolute best in the market and are the result of extensive development and use of technological advances. Although QP has competitors, QP is by far the major company by sales and it is dominant in its industry.
QP usually sells its products using its own sales force, but sometimes sells through sales agents or other distributors.
Background on Bill Bright: Bill Bright is now three years out of school after getting his MBA. He works at QP as a Marketing Strategy Associate. Quality Products is a medium sized company, but is growing fast with expansion expected to continue within the U.S. and globally. Bill has had a lot of success already at Quality Products and he’s clearly on a career fast track with the company. Bill has been told by his current manager – Betty Brilliant – that his next promotion will be to a junior manager position “If he continues to perform”. This would be a sizable jump in pay and would set him up for a more senior position in the next five years, especially if the company keeps growing.
Bill is just now starting to get control of his oppressive school debt. He is getting “serious” with a woman who is just out of school and who wants to build her own business based on her art history background.
Betty called Bill into her office last week and told him that he was “being evaluated” by senior management and that part of this was a special assignment for another manager at the company – Sam Sneekin. Betty sent Bill to talk with Sam on the Monday morning we join this scenario.
Sam is explaining to Bill that the company is looking to expand overseas and that Bill is now a part of a team to develop the expansion strategy. “They do things a little differently than we do over there”, Sam is telling Bill. “They don’t have the same ridiculous regulations and red tape we have to deal with.” “We can be a lot more ‘flexible’ in how we approach our potential customers and market information.”
When he said the word “flexible”, Bill got a strange feeling in his stomach. Sam had a bit of a bad reputation at Quality Products and Bill knew it. Sam progressed through the ranks fast himself and always “got the job done”. The rumors were about his tactics being less than reputable. Bill knew Sam had also been investigated once for a sexual harassment allegation raised by one of the company’s summer interns. Bill had only limited experience doing business globally, so he didn’t know exactly what to make of Sam’s comments.
After explaining just how important this project was to the company, and how much it might impact Bill’s career if this was a success (or a failure), Sam handed Bill a sealed envelope and said “This stuff is going to make you look like a genius. I wish I was in your shoes on this one.” With that, Sam gave Bill the name of the project team leader – Steve Lackee – and told him his next stop should be to see him. As Bill was leaving, Sam said “Oh, and by the way, I’ve asked Steve to get Emilee off that team… She’s ‘dead weight’ and she’s pulling all the guys on the team down. See you around.”
[This conversation will continue in the Term Paper Assignment.]
Background on Betty Brilliant: Betty has been with Quality Products “since the beginning”. She was hired by the company’s founder Rich N. Vestor and they became quite good friends, even vacationing with their spouses together several times. Rich sold his interest in the company to a new investor – Nouv O. Rich – and gave up any involvement in the business, about nine months ago. Even though the company has been growing, Nouv has hinted that some cuts to the company’s management workforce may be necessary “to get the right people on, and off, the bus”, as he put it. Nouv has made no big changes yet, but seems to always be watching the senior managers and asking a lot of questions.
Betty is a successful senior manager and has built much of her success on her own hard work and ability to attract good people to her group. Part of this has been her ability to set realistic goals for her marketing group. Meeting or exceeding these goals year in and year out has meant that Betty and her group have received generous incentive payments from the company’s incentive compensation program.
While some years her goals have been tougher to achieve than others, this year has been the most difficult of all. In fact, with the company’s fiscal year closed on December 31, 2016, it is not clear that her group has met even the “trigger” for the plan. If they didn’t meet the “trigger”, they wouldn’t receive any payment at all under the plan.
Betty has been working with the company’s accountants on the final sales numbers. Betty had told the sales force to get their sales in as fast as possible so that they would be counted before the end of the fiscal year, but it seems that many sales were reported “late”, or have not even been reported at all yet. One problem she faced with this is that the sales force reports up through a different department of the company (the department headed by Sam Sneekin) so that she has no direct management control over those people. While Betty’s group does most of the marketing strategy and projects the sales numbers, it is up to the employees in Sam’s group to actually make and book the sales. Sam’s incentive compensation goals include other company initiatives and his group had already clearly “triggered” before the end of the fiscal year.
Although Betty has an excellent reputation for integrity, someone has been spreading rumors that Betty is trying to pressure the accountants into “moving sales” to allow her incentive compensation to “trigger”. Nouv has asked Betty to “join him” next week for a meeting to talk about her goals and Betty needs to know where she stands on the incentive compensation program for that meeting. So far the accountants have said “We can’t record the sales unless we have the sales records from the reps in the field that show sales during our last fiscal year.”
[This scenario will continue in the Term Paper Assignment.]
Background on Nouv O. Rich: It’s now been a week and Betty’s group has just barely made the “trigger” for the incentive compensation plan. While this means the group will get a payout, it will be far less than what the employees are used to. Betty also worries, more than a little, that this does not give her new boss the best image of her.
During the week, Betty spoke to all employees in her group. She took time to explain the situation and answer their questions, and made it clear that the ultimate decision on what should be included as sales for the last fiscal year was up to the accountants and that she supported them in whatever they decided. She had prepared the employees for the possibility that they would receive no incentive compensation, but thanked them for their efforts. She took “the high road” by not pointing the finger at Sam and his group for their predicament or the rumors about her. Betty was more than a little surprised to see Nouv in the back of the room during the presentation.
We rejoin Betty as she is waiting to see Nouv. Betty is surprised to see Bill Bright also waiting to see Nouv. “What brings you here Bill?”, she says. “I don’t know,” says Bill “I was asked to come and so here I am. I hope it doesn’t have anything to do with me taking a memo to the legal people for them to review.” Nouv opens his office door and says “Come on in.” “Congratulations on making the ‘trigger’”, Nouv says to Betty with a smile. “Thank you, although I had hoped we could do better”, Betty responds. “Not at all bad in my view”, Nouv responds, “But we should all try for better this year. That’s part of what I wanted to talk with you about.”
“Betty, I asked you and Bill to be here today because I have something I need your help on. I’ve been careful to not make big changes right away when I took over leadership of this company. You have enjoyed quite a bit of success without me and I didn’t want to destroy what you’ve built. That being said, the company has been going through lots of changes, not even counting me coming in as the owner. We have lots of new employees, we are outgrowing our office space, we are expanding geographically and in places where the business practices aren’t familiar to us, and we have so many new initiatives in so many different areas that we are losing focus on what really matters for our future success.
Betty, I’m going to ask you to continue to lead the marketing group, but also to take over Sam’s sales force. It just doesn’t make sense to me to have those functions split at this point. We’re going to be working on a comprehensive marketing plan that you control from the ground up. I know that this will be a heavy burden, but from what I’ve seen of your leadership qualities, you can handle it. Let’s talk in a week about what staffing you’ll need and, once we get the ball rolling, we’ll talk about an appropriate bump up in your compensation. How does that sound to you?” Betty could hardly believe it, she hadn’t prepared for this, all she could say was, “I’ll give it my best.” Later she’d kick herself for her loss of words. “I can’t talk about the reasons, but I want you to know that I’ll be letting Sam go right after this meeting. I just needed to know you were ready to take this responsibility on before I made that move.”
Talking to Betty, but turning to Bill, Nouv went on, “I’m leaving Bill in your group but asking him to take on a special project, with you as the sponsor.” Bill sat up a little straighter. “Bill, I’m convinced that we have a strong overall culture at this company. There are a lot of great people here. To enhance that though, I’m asking you to lead a company-wide effort to identify the values and principles that have made this company so successful and that will take us to the next level, including our global expansion. I’m not sure exactly how to do this, but you’re a bright person – pardon the pun – so I want you to dig into this and find what is best for the company. We need to use this as a way to get everyone pulling in the same direction and refocused on what really matters to us, so I’m asking you to work with our Human Resource Director and our head of Strategic Planning. I have already talked with them about this and they are going to provide you with team members and their personal support. Your objective is to incorporate these values and principles somehow into an updated Code of Conduct.” There was a pause. “So do you think you’re up for that?” said Nouv. “Yes…. I am, but what about my role on the new territory sales team?”, said Bill. “Well, it looks like you were going to replace Emilee Ethics and I have specifically asked her to continue on that team. I need you on this new project.”
[To be continued in the Term Paper Assignment…]
PART 1 Requirements
Identify the issues and provide a clear one or two sentence statement of the issue presented
Each situation may raise multiple potential issues so give each issue separately.
Please draft your issues as “bullet points
The best issue statements will be in the form of a question.
Three issues must be identified from bullet 1 under part 1, then identify the rest of the issues from the other number bullets.
In part one, you are only identifying issues, that is it.
You should then give your Analysis/Reasoning, relating back to the course materials for support.
PART 2 Requirements
Write a “legal memo” to Nouv on the issues presented below.
Do not restate the facts.
Your memo should start with the one sentence Issue identified for each situation.
You should then state your Conclusion/Recommendation
Each of your two “legal memos” should be no longer than one page, single spaced.
SAMPLE BRIEF: SMITH V. VAN GORKOM
FACTS: The shareholders of Trans Union Corporation sought rescission of a cash-out merger of Trans Union into New T Company, a wholly-owned subsidiary of Marmon Group, Inc. On September 13th, 1980, Jerome W. Van Gorkom, Trans Union’s chairman and Chief Executive Officer, met privately with Jay A. Pritzker, a well-known corporate takeover specialist and one of the owners of Marmon, and proposed to Pritzker an opportunity to enter into a $55 per share cash-out merger. On September 15th, Pritzker notified Van Gorkom that he was interested in the cash-out merger proposal. On September 20th, Van Gorkom held a special meeting with the Senior Management of Trans Union, and subsequently met with the Company’s Board one hour later. At the meeting with Senior Management, Van Gorkom disclosed the merger offer and described its terms, but did not furnish copies of the proposed Merger Agreement. Similarly, at the meeting with the Board, Van Gorkom provided a 20-minute oral presentation regarding the proposed Merger Agreement, but again failed to provide the written proposal.
Based solely on Van Gorkom’s oral presentation, supporting representations from Bruce Chelberg, President and Chief Operating Officer of Trans Union, an oral statement from Donald Romans, Chief Financial Officer of Trans Union, indicating that his preliminary study of the $55 per share did not indicate either a fair price for the stock or a valuation of the Company, and on James Brennan’s legal advice, the Board approved the proposed Merger Agreement within two hours. Neither Van Gorkom nor any other director read the agreement prior to its signing and delivery to Pritzker.
The Board approved for mailing around January 27th, 1981, a Supplement to its Proxy Statement which set forth details of the Merger Agreement, which had not been included in the first Proxy Statement mailed January 21st. On February 10th, the stockholders of Trans Union approved the merger
ISSUE: Was the Board’s decision reached on September 20th, 1980, to approve the proposed cash-out merger the product of an informed business judgment and did the Board provided complete candor to the stockholders before securing the stockholders’ approval of the merger?
CONCLUSION: No, the Board’s decision reached on September 20th, 1980, to approve the proposed cash-out merger was not the product of an informed business judgment and the Board did not provide complete candor to the stockholders before securing the stockholders’ approval of the merger.
ANALYSIS/REASONING: Under Delaware law, business and affairs of a Delaware corporation are managed by or under its board of directors. Under the business judgment rule, there is no protection for directors who have made “an unintelligent or unadvised judgment”, and is derived from the fiduciary capacity in which he or she serves the corporation and its stockholders. Directors have an affirmative duty to protect the financial interests of those whom he or she represents and to critically assess all pertinent information. Since there were no allegations or proof of fraud, bad faith, or self-dealing, it is presumed that the directors reached their business judgment in good faith. The concept of gross negligence is the proper standard for determining whether a business judgment reached by a board of directors was an informed one. Regarding a proposed merger of domestic corporations, a director has a duty under Delaware law to act in an informed and deliberate manner in determining whether to approve an agreement of merger before submitting the proposal to stockholders. Whether the directors reached an informed decision on September 20th must be determined only upon the basis of the information then reasonably available to the directors and relevant to their decision to accept the Pritzker merger proposal.
The Board did not reach an informed business judgment on September 20th because the directors did not adequately inform themselves as to Van Gorkom’s role in forcing the “sale” of the Company and in establishing the per share purchase price, were uninformed as to the intrinsic value of the Company, and were grossly negligent in approving the “sale” upon two hours’ consideration, without prior notice, and in the absence of a crisis or emergency.
None of the directors, other than Van Gorkom and Chelberg, had any prior knowledge that the purpose of the meeting on September 20th was to propose a cash-out merger of Trans Union. Without any documentation, the Board was required to rely on Van Gorkom’s 20-minute oral presentation of the proposal. No written summary of the terms of the merger was presented, the directors were given no documentation to support the adequacy of the $55 price per share for the sale of the Company, and the Board had nothing more than Van Gorkom’s statement of his understanding of the agreement which he admittedly had never read, nor which any member of the Board had ever seen. Neither Van Gorkom’s oral presentation nor Roman’s brief oral statement constitute a “report”.
The Company was also mis-valued by Van Gorkom, who reached a total value of the Company by multiplying the $55 per share figure (based solely on the availability of a leveraged buy-out) by the number of shares outstanding, to reach a valuation of $690 million. As such, Van Gorkom failed his fiduciary responsibility to the Company.
The directors of Trans Union also failed to disclose “germane facts” to the shareholders relating to the merger that required shareholder approval, according to the directors’ fiduciary duty. Since the shareholders were not provided material facts regarding the proposed merger, the shareholders approval of the merger was not based on an informed electorate.
MARYMOUNT COLLEGE SUED FOR AGE DISCRIMINATION
FACT: Marymount Manhattan College (MMC), a school where they teach dance, had an open position for a dance teacher. An advertisement was posted to hire a qualified applicant to train the students in dance. Several applicants applied for the job, including a 64 year-old choreographer, Patricia Catterson. Catterson was the most qualified candidate for the position. However, when MMC realized that Catterson was the leading candidate, things took a different turn. The school decided to extend its search, and they included a less qualified person. The school selected the 37 year-old applicant over the 64 year-old applicant, causing Catterson to lose the job. MMC felt that the 34 year-old was the right person for the job due to her age. The loss of Catterson’s job opportunity triggered the age Discrimination Act. The Equal Employment Opportunity Commission (EEOC) filed a suit with the US District Court of New York under civil action no. 12-CV- 2388 (JPO). It is important to note that US District Court of New York had previously attempted a conciliation process through the pre-litigation settlement. District judge Paul Oetken was assigned the case.
It is a fact that the 64 year-old, though she was experienced and deserved the position, was denied the opportunity because of her age. The position was given to a younger person whom the school felt was deserving. Under the law, it is prohibited to discriminate against another person based on their age. Workers should be evaluated by their abilities and not based on their age. Age should not be a major factor when it comes to hiring a qualified applicant. According to the case, the deciding factor was age.
ISSUE: Was the decision by the school to hire the 37 year-old lady instead of the 64 year-old woman legal? Was the lady fit for the job, and could her age prevent her from taking care of her responsibilities as per the job description?
CONCLUSION: NO. The decision by the school to hire the 37 year-old woman in place of the 64 year-old qualified candidate was illegal. The law provides that any person that has the ability to carry out their duties qualifies for the position for which they applied. Age discrimination should not take place anywhere as long as the candidate is qualified and can effectively carry out his or her duties; then it is up to the employer to hire him or her.
ANALYSIS AND REASONING: According to the age discrimination and employment act, all job applicants aged forty and above should not be discriminated against (Beatty, 2008). Everybody should undergo the right procedure when they are applying for jobs, and the right candidate should be offered the job without favoritism. According to the regional attorney of EEOC’s office of New York, older workers or older people applying for jobs should not be discriminated against and should be evaluated by looking at their abilities, and not necessarily based on their age. Therefore, what should come first is whether they have the capability to handle the task as required by the employer and whether they can meet the expectations of the people who are served by the person. No place in the application has age specifications, so it is up to the hiring firm to ensure that people who apply meet the other necessary qualifications and at the same time be in a position to execute the duties as required by the institution. In this case of the Marymount School, the 64 year-old candidate was qualified for the job. It is evidence because after the school conducted the interview, Catterson was among the top there candidates. After the second interview, she also emerged the best over the three candidates who were shortlisted. Therefore, it is not true that she did not meet the qualification requirement. Another issue is that the school swapped Catterson with one of the other applicants who were younger, meaning that they disqualified the candidate who was fit for the position based on her age. It shows that it was an unfair issue because she was qualified in every way to teach the class and was not chosen because of a factor that wasn’t important for the class.
The school did not have any other valid reason as to why they did not hire Catterson even after she qualified for the position. They did all they could to make Catterson believe that she was just not qualified enough of the job. When questioned, the school denied making a decision based on the woman’s age, but rather claimed she was denied for other personal traits. Worse is that even after proving that she could tasks as expected, they did not give her the opportunity to prove it by working. The institution went ahead and hired an unqualified woman who to them was fit because she was young and could be in a position to handle things better and be committed more than the older woman.
Therefore, Catterson was a qualified candidate and had skills that had overtaken the rest of the candidates. Obviously, the school took things against the law and the school has a case to answer. Justice should be offered to the old lady because `she was denied was she deserved.
The institution could have hired the person in question because after all, she was qualified for the position. Secondly, judgment passed on age was unfair because she was more deserving than any other candidate to take the position. moreover, they could have given her the opportunity to serve at the institution as a choreographer and if her age limited her in her performance, then the institution could have terminated her contract based on the fact that she did not she did not perform and not on presumed decisions.
Barnes, P. (2012). EEOC Tackles Ageism in Academia. Retrieved from http://abusergoestowork.com/tag/marymount-college/
Beatty, J. F., Samuelson, S. S., & Bredeson, D. A. (2014). Legal Environment (5th ed.). Mason, Ohio: South-Western.
Marymount Manhattan College Settles EEOC Age Discrimination Lawsuit. (2011). Retrieved from https://www.eeoc.gov/eeoc/newsroom/release/1-4-13b.cfm