Final answer:
Gary should leverage his rights as a major shareholder in RedCard, Inc. to vote and elect a board of directors that emphasizes ethical conduct and legal compliance. By doing so, he can contribute to effective corporate governance and inhibit potential mismanagement by the executive team.
Step-by-step explanation:
If Gary is concerned about the future prospects of RedCard, Inc. due to potential ethical or legal failures by an ambitious CEO, he should proactively utilize his status as a major stockholder to influence corporate governance. The board of directors, being the principal mechanism for overseeing the management team, are elected by the shareholders. As an investor with significant shareholding, Gary's votes carry weight in electing directors who align with his vision of upholding high ethical standards and legal compliance for the company.
Furthermore, Gary can express his concerns to external auditors and institutional investors who often hold sway over corporate practices. He should ensure the elected board of directors are individuals of integrity and that they thoroughly understand their role in monitoring the company's executive actions. This can prevent circumstances similar to, for example, the corporate governance failings of Lehman Brothers, which resulted in inaccurate financial information being presented to investors.
Ultimately, by actively participating in elections and conversations with other governance institutions, Gary can help ensure that there is a robust system of checks and balances at RedCard, Inc. to safeguard against the potential risks posed by the company's management.