Question

Roz, a director of Soy Inc., is specially trained in petroleum trading. Soy’s board approves several deals in which the company pays too much for soybeans. Roz approves all the deals without first reviewing them. Roz is most likely liable for breach of

a. the duty of care.
b. the business judgment rule.
c. the duty of loyalty.
d. none of the choices.

Answer 1

Roz is likely liable for breaching the duty of care by failing to review business deals before approving them, which a reasonably prudent person would have done. The business judgment rule may not protect her due to the lack of informed decision-making. The correct option is a. the duty of care.

Step-by-step explanation:

Roz is most likely liable for a breach of duty of care. The duty of care requires directors of a corporation to act with the care that a reasonably prudent person would use in comparable circumstances.

Since Roz approved the deals without reviewing them, even though she is specially trained in petroleum trading and not soybean trading, she failed to exercise this reasonable care.

The business judgment rule generally protects directors when they make informed decisions without a conflict of interest, but Roz's failure to review the transactions indicates a lack of due diligence, potentially voiding this protection.

As for the duty of loyalty, there is no indication that Roz had a conflict of interest, only that she was negligent in her duty of care towards the corporation's financial interests. The correct option is a. the duty of care.