Jean and Scott are directors at X Corporation, a film production company. X specializes in commercials and is very successful with them, regularly earning a considerable profit. One year, in an effort to keep the company current. X considers using some of its extra cash to move away from commercials and start producing music videos. Jean and Scott spend months researching music videos and meet with many talented directors and bands, as well as financial analysts who advise as to the cost of music video production. After evaluating all the information, Jean, Scott, and the rest of the X Corp board decide to abandon commercials and make music videos exclusively. Unfortunately, music video production goes badly and the value of X Corp stock drops significantly. Shareholders are angry and file suit on behalf of the corporation against the Board. The shareholder argument is that the X Corp Board mismanaged the corporation when it decided to abandon commercials and make music videos. Will the court find that the Board is liable to the shareholders? No, because Board Members are not liable to shareholders for honest mistakes of judgment and bad business decisions No, because the Board is protected from liability aside from their capital investment Yes, because the Board did not exercise due diligence when deciding to make music videos instead of commercials Yes, because the Board's decision resulted in a significant loss of revenue
