Legal Duties of Directors and Officers in Business Ethics

RUNNING HEAD: Business Ethics 0
Business ethics

Business Ethics 1
Assignment #1
Policy: Fitzgerald Food periodically conducts an internal audit of financial reports and
internal control to determine if directors and officers conform to the requirements and
achieve the desired results.
Purpose: To describe the legal duties, it is intended to impose on the directors and officers
and determine whether they have violated legal duties of the organization.
Scope: The evaluation of how violation of duties can negatively affect corporation and
shareholders.
Responsibilities:
Legal Duties of Directors and Officers
It is the duty of directors and officers to monitor and supervise the conduct of the business.
They also have right to take all the reasonable steps to keep up-to-date information which
flows to the board. The information is the result of monitoring procedure and techniques
(Chell, Spence, Perrini & Harris, 2016).
The directors and officers of Fitzgerald Food have the duty of inquiry to follow up on the
information. Such information has been acquired and raises cause for concern.
It is also the duty of directors and officers to employ an equitable decision-making process.
They also have a duty to employ a reasonable process of decision making.
According to the business judgment rule the directors’ act in the best interest of a company.
The breaching of contract by directors shows that the directors and officers were not working
in the best interest of the company. They fail to meet duties of loyalty, care, and good faith.
The business judgment rule is intended to protect directors and officers in a case when the
decisions turn out to be bad (Pearson, 2017). The business judgment rule is a judicial review
of directors and officers conduct. The rule also protects directors and officers from the
liabilities where they have used appropriate measures and made decisions in the good faith
(Steyn, 2014).