Question

Reference: "Machine Malfunction." Bruno, the president of a health club operation called ABC Health Club, convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits. Unfortunately, after the purchase, it was announced that "Perfect Body" was actually a very dangerous machine that should not be used. The manufacturer of "Perfect Body" went bankrupt, and Work Out lost $200,000 on the purchase of the machines. The shareholders are furious and want to sue Bruno and the directors. In an attempt to appease her, the boardof directors agrees to allow Frances, the ring leader of the shareholders, to purchase stock of the company at below its fair market value. Frances purchases a considerable amount of stock on that basis, but says that the shareholders plan to continue with an action against Bruno and the board members. Under which of the following should Bruno and the board of directors defend themselves in an action brought by shareholders for harming the corporation?
A. The Superior Judgment Rule.
B. The Research and Investigation Rule.
C. The Business Judgment Rule.
D. The Rule of Corporate Integrity.
E. There is no defense

Answer 1

Bruno and the board of directors defend themselves in an action brought by shareholders for harming the corporation is The Business Judgment Rule.

Answer: Option C

Explanation:

In the case that has been shown above is harming the board of the directors. They can protect them selves with the business judgement rule. In this rule, the managers or the directors of the business are protected who have a good image for the working of the company.

This rule does not take into consideration what the matter is but protects he directors and the managers, so they should use this rule to protect them selves and Bruno from the share holders.