No, the directors did nothing illegal because the deals they made were fair to the company. Normally, courts don't second-guess business decisions—that's called the 'business judgment rule.' But since the president's family was involved, the court had to look much more closely to check for a 'conflict of interest.' After checking, the court found the radio show was a real, useful advertisement for the company. The president's wife was a talented singer who was paid a normal price, and the show wasn't all about her. Likewise, paying the president's brother was a good deal because he was a brilliant scientist who gave the company valuable inventions. Even though the family benefited, the company got its money's worth, so the directors acted properly.

No, the company leaders didn't do anything wrong, because their choices about the radio ads and the work contract were business decisions they were allowed to make. The radio ads, even with Miss Tennyson, were meant to help sell the company's products. And the money paid to Dr. Henri Dreyfus under the 1933 contract was for important work and inventions he gave to the company, separate from what he had to do under the 1918 contract. There's no proof the leaders acted dishonestly or for the wrong reasons. The special rule that protects business decisions covers what the leaders did here, since they didn't do anything fraudulent or put their own interests first.

No, the company leaders didn't do anything wrong, because their choices about the radio ads and the work contract were business decisions they were allowed to make. The radio ads, even with Miss Tennyson, were intended to promote the company's products. The payments to Dr. Henri Dreyfus under the 1933 contract were for important work and inventions he provided to the company, separate from his obligations under the 1918 contract. No proof exists that the leaders acted dishonestly or had improper motives. The business judgment rule covers their actions here, since they did not engage in fraudulent conduct or place their own interests over the company's.

No, corporate directors do not breach their fiduciary duty when making decisions that benefit a director's family member, provided the decisions are made in good faith and are inherently fair to the corporation. The business judgment rule generally protects directors' decisions on matters of policy and management, such as the type and cost of an advertising campaign. However, this protection yields to the rule of undivided loyalty when a director has a personal interest in a transaction. In such cases, the transaction is subject to rigorous scrutiny, and the burden is on the directors to prove both good faith and the transaction's inherent fairness to the corporation. Here, the advertising campaign served a legitimate corporate purpose, and the corporation received full value. The president's wife was a competent artist, was paid a standard fee, and was not given undue prominence. Similarly, the compensation paid to the president's brother, a leading chemist, was fair consideration for the valuable services and patents he provided to the corporation. Therefore, despite the appearance of a conflict of interest, the directors satisfied their duty by ensuring the transactions were fair to Celanese Corporation.

No, the directors did not breach their fiduciary duties, because their decisions regarding the radio advertising program and the employment contract were within the scope of their business judgment. The radio program, while featuring Miss Tennyson, served a legitimate corporate purpose of advertising the company's products. The payments to Dr. Henri Dreyfus under the 1933 contract were for valuable services and inventions he provided to the company, separate from the obligations under the 1918 sales contract. There is no evidence the directors acted in bad faith or for noncorporate purposes. The business judgment rule protects the directors' actions in this case, as there is no showing of fraud, conflict of interest, or breach of the duty of loyalty.

Bayer v. Beran

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