Legal Factors in Corporate Management Essay Based On Goodly Corp Scenario:
The Goodly Corp scenario can be analyzed in two different perspectives. The first way of looking at the situation considers the shareholders rights and place in the company, and the impact of the director`s decision on market value of the shares .The second perspective acknowledges the responsibility of the directors to make decisions that will fulfill the company`s objectives regardless of what the shareholders may feel because the directors possesses the expertise required to run the company and are more knowledgeable in the strategies that will make the company a financial giant. This paper will scrutinize both perspectives and choose the best.
Shareholders have a big stake in the company`s operations because they have sunk in their savings to finance the company`s operations. As the owners of the company, they have the legal right to be consulted before any major decisions made by top management can be implemented. This is especially critical when the impeding decision requires a lot of capital or if it will cause a major overhaul in the image or market structure of the company.(Harris 2009)
The board of directors has an obligation to make decisions that will earn more revenue and thus increase shareholder value. In the Goodly Corp scenario, the directors have failed to fulfill their responsibilities to shareholders by making an ill advised decision that heavily in debts the company causing a drop in stock price and are therefore liable.
In the second perspective, the directors take center place in the company`s operations thus have the right to make decisions as they see fit. Looking at this perspective, the directors are not liable because they have simply fulfilled their obligation to the company by seeking its growth though they made a big gaffe by failing to make a thorough analysis of the financial implications of the their decision.
The superior perspective bears in mind the fact that the directors had a moral obligation to ensure that all decisions were backed up by sound financial documents and thus failed the shareholders by imprudently borrowing a huge amount of capital without considering the interests of the shareholders. The way forward would have been for the directors to consult the shareholders before implementing the decision thus ensuring that the company`s goals are aligned to the needs of the shareholders therefore eliminating the source of conflict.
Harris, L. (2009). Mastering corporations and other business entities. Durham, N.C., Carolina Academic Press.