Reference no: EM133556122

Case 1

Joan, who is a massage therapist graduate, incorporated a massage type business with one of her minor children as the shareholder. Michelle, who is also her best friend, is a regular client of which Joan had rendered massage services each month. Michelle paid Joan's professional service thru her insurance benefits from her company. Michelle felt that she wants one more massage service and, this time, she used the insurance benefits of her son, Jake, and her son's name as though the client of Joan. Joan issued a receipt in the name of Jake.

Issues:

Comment on shareholder as minor. Can a minor shareholder act as director as well?

Comment on legal issue with respect of using the insurance benefits of family member. Also, on ethics and professional conduct.

Case 2

ENR Inc is a public energy company. Aside from energy business, the company is involved in trading of derivatives markets. Its annual revenue was $100 billion dollars, and it has 10,000 more employees. It is normal for a large company to have a stringent code of ethical standards. Good ethical standards reflect the reputation of the company as responsible corporate entity. For six consecutive years, the company was named by the Fortune Magazine as one of the most innovative companies. AH LLP is an independent auditing firm and one of the top five auditing firms. AH LLP is the auditing firm of ENR Inc as well as consultant. The firm maintain a good professional relationship and even beyond, because they considered it a valuable client, as it delivers huge professional fees in audit and consultation services in tax matters. Losing them, would certainly does affect the revenue of the firm and bonuses enjoyed by few executive officers. The auditing firm also acted as internal auditor of ERN Inc. The head of auditing team, who conducted an annual audit of ERN Inc, was offered one week vacation together with his family and all expenses were paid by the company. The auditing firm conspired with the executive officers of company to manipulate the outcome of the audit and in order to make it appear that it made a huge profit from its operation. The executive officers abused their power and privileges, manipulated information, engaged in inconsistent treatment of internal and external constituencies, put their own interests above those of their employees and the public, and failed to exercise proper oversight or shoulder responsibility for ethical failings that resulted in the sudden drop of its stock price from $100.00 to $0.26 cents.

Issues: Discuss and identify issues on corporate social responsibilities (CSR) and ethics.

Case 3.

Jack, a stockbroker, was an inexperienced in tax. He has sought the advice of an independent designated tax professional to advise him on tax planning and tax shelter that he needs. Simon, who is a designated accountant who specialized in those areas, advised Jack to invest in a number of multiple unit residential building (MURBs), a real estate investment project as tax shelter, by the conventional wisdom, were safe and conservative. When the value of MURBs fell during a decline in the real estate market, Jack lost heavily in his investment. Though the advice was perfectly sound at the time it was given, but unknown to Jack, Simon was also acting as adviser for developers in restructuring the MURBs and did not disclose that fact to Jack.

Questions: In the context of breach of contract, is Jack liable for the loss of investment? In the context of breach of fiduciary duty, is Jack liable as well? Please state your reason.

Case 4.

Mr. Hunt, who has just retired, set up an investment account with Ms. Jane, an investment specialist, of TD Evergreen. Prior to his retirement, he is a Vice President of a large footwear manufacturer. His knowledge on investment is average and the investment account he had set is non-discretionary meaning no trade will be completed without Mr. Hunt express approval. Further, a non-discretionary account is one in which the investor decides on what trades to make. With Mr. Hunt's approval, Ms. Jane sold 2,500 shares which was half of his 5,000 shares to BCE. By the time Mr. Hunt learned of the disposition of shares of stock, the stock market price went up. Mr. Hunt sued TD Evergreen for the lost of profit due breach of contract and breach of fiduciary duty.

Questions: In the context of breach of contract, is TD evergreen liable for the lost profit? In the context of breach of fiduciary duty, is TD Evergreen liable? Please state your reason.

Case 5

The majority shareholders of the ABC Corporation wanted to sell its main assets. The directors called a meeting of shareholders of which the shareholders passed resolution instructing the board of directors to go ahead with the sale, despite opposition from minority shareholders. The power of the directors emanates from shareholders who elected them.

Question: Are the directors always bound to carry out the instructions from the shareholders? Please state your reason.