Matrix Corporation's board of directors decides not to outsource its U.S.jobs to China,even though it would cut labor costs by fifty percent.Shareholders subsequently sued the directors for failing to maximize profits.Under the traditional view,the directors would be:

Question

Quizplus · Accepted Answer

Under the traditional view, directors have a fiduciary duty to act in the best interests of the company and its shareholders, which is generally interpreted as maximizing profits. However, this duty does not necessarily mean that directors must always prioritize the financial interests of shareholders over all other concerns. In cases where a decision may have other, non-financial implications (such as significant social or environmental benefits or harm), directors may be able to justify their decision not to pursue a course of action that would maximize profits. In this case, the directors may be liable to the shareholders if they cannot show that their decision not to outsource was based on a reasonable assessment of the overall impact on the company and its stakeholders. As such, choice C - liable to the shareholders, unless they can prove their decision not to outsource was made with the shareholders' profits interest above all other interests - is the best answer.

Matrix Corporation's Board of Directors Decides Not to Outsource Its