Suds CorpHas Just Suffered a Huge Loss of Revenue for Three

question 35

Essay

Suds Corp.has just suffered a huge loss of revenue for three quarters and the shareholders are furious.Much of the loss can be attributed to a board decision to change the focus of the company from traditional lager beer to a lighter and smoother brew.Unfortunately the new recipe alienated current customers and failed to bring in new customers.Although Suds has announced that they will return to their original product,the shareholders are claiming a violation of the board's fiduciary duty of care and they are suing the directors personally for their significant losses.What must the shareholders prove to be successful? What defense is available to the directors and what must they prove to prevail?

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Definitions:

Monthly Consumption

The total amount of goods and services that consumers purchase and use within a month.

Monthly Income

The total earnings received by an individual or entity on a monthly basis, from sources such as employment, investments, and other income.

Income Elasticity of Demand

Indicates how the quantity demanded of a good changes in response to a change in consumers' income.

Monthly Income

The total amount of earnings received every month from work, investments, benefits, and other sources.