Question

Several retirement funds that own shares in News Corp., Inc., have filed suit against Rupert Murdoch, the chairman of the board and CEO of News Corp., alleging that Mr. Murdoch had the board approve the purchase of his daughter’s company for $675 million. Part of the purchase deal included putting Murdoch’s daughter on the News Corp. board. Which would be the best theory for recovery by the retirement funds? a. Breach of fiduciary duty b. Violation of the business judgment rule c. Violation of the corporate opportunity doctrine d. Insider trading

Answer 1

The correct answer is letter "B": Violation of the business judgment rule.

Step-by-step explanation:

Violation of the business judgment rule applies when stakeholders of a corporation plead fraud, breach of trust, conflict of interest, corruption, bad faith against the firm's manager. The business judgment rule is based on the principle that executives must act in good faith according to the purposes why the stockholders have selected them.

In News Corp. case, investors have enough reasons to doubt Rupert Murdoch's activities for influencing his daughter's company to be purchased by News Corp. and letting her be part of the Board of Directors.