In: Economics
A group of about 20 shareholders for the Fly High Corporation, a multinational airline, sued the CEO of Fly High, Chelsea Edinburgh, for failing to disclose that she had relations with the officers at one of the rivaling airlines, Delta Airlines. Chelsea had recently shut down several flight routes that were not creating the revenue flows that Chelsea desired. This decision had received the majority of shareholder approval during a vote. However, the 20 shareholders alleged in court that Chelsea had violated her duty to disclose the fact that she had a conflict of interest in that Delta Airlines' CEO was one of Chelsea's college classmates, and Delta Airlines would continue to operate the flight routes that Fly High had just shut down. The court ruled in favor of Chelsea, however, concluding that Chelsea had acted consistent with the shareholders' vote and in good faith.
But what if the facts of the case were different? Select each set of facts below that could change the outcome of the case.
Check All That Apply
Answer:
Fact of case: Instead of being an old college classmate, the Delta Airlines CEO was Chelsea's ex-husband. Chelsea disclosed this fact, and still received the majority of votes from shareholders.
Possible outcome of the Case: As the CEO of Delta Airlines was Chelsea's ex-husband, but she had disclosed this fact and also receiving trust of majority shareholders. Only being in relationship in past in personal life cannot be ground to judge the professional life decisions. Also the decision taken by Chelsea to shut down low revenue flight routes were backed by majority vote of shareholders. Only assumption of some shareholders that rival airlines CEO is her ex-husband and thus she had a conflict of interest is not a legal argument. The court ruled in favor of Chelsea.
Fact of case: The two shareholders who supported the shutdown proposed by Chelsea Edinburgh each owned 30% of Fly High Corporations' shares, and had always backed Chelsea's decisions in the past because they were close friends of Chelsea outside of work.
Possible outcome of the Case: Gaining the trust of majority shareholder in her own organization does not affect anyway the case. This may be a positive sign for Chelsea in this case as 2 shareholders of 30% share each in Fly High Corporations support her, but this argument does not affect the case outcome.
Fact of case: A set of e-mails presented in court revealed that Chelsea had been contacted by the Delta Airlines CEO, and had been offered a future director's job paying twice her current salary if she shut down the several flights that were not creating revenue flows that Chelsea desired.
Possible outcome of the Case: Set of e-mails presented in court revealing offers of Director post at double salary than now for shutting down low revenue flight routes by Delta Airlines CEO proves allegations of conflict of interest by Chelsea. As a CEO of Fly High she has powers to convince shareholders to vote in favor of her decision. She misused her post and made decisions which were not in favor of Fly High operations but biased by the offer proposed by Delta Airline CEO. The outcome of case will be against Chelsea.
Fact of case: Chelsea disclosed that she knew that Delta Airlines was headed by an old college classmate whom she had never spoken with.
Possible outcome of the Case: Delta Airlines was headed by Chelsea's old college classmate whom she had never spoken with, cannot be argued that she is in conflict of interest with Delta Airline. In legal battle this argument cannot be presented against Chelsea. The court ruled in favor of Chelsea.