Discuss Chapter 34 case question 2 on page 899 (restated here for your convenience): Both Viacom and Paramount owned a diverse group of entertainment businesses. QVC was a televised shopping channel. The Paramount board of directors accepted a merger offer from Viacom at a price of $69 per share. QVC and Viacom then entered a bidding war for Paramount. QVC ultimately made the highest offer, at $90 per share. The Paramount board rejected QVC’s bid on the grounds that a Viacom merger would be more in keeping with Paramount’s business strategy. Was the board in violation of the business judgment rule? Explain.

Yes, the board was in violation of the Delware law as board of directors (BOD) have no discretion to decide on low bidding partner (perceived as better option) over the highest bidder. Reason being, once two companies merge, a new entity takes place or new board of directors are appointed to take new entity to greater heights. Thus, the assumption / prediction of current BOD as to the working of future board is unrealistic, insuffiecient and injustice to the highest bidder.

Thanks for installing the Bottom of every post plugin by Corey Salzano. Contact me if you need custom WordPress plugins or website design.