Case Problem Analysis: Liability of Directors Mara Raj was hired to serve as Chief Executive Officer of Washington Retirement Home, Inc., a corporation that ran the Washington Retirement Home nursing home. When Ms. Raj took over as CEO, the nursing home had been in financial trouble for decades and only had stayed open because of donations from private foundations and some financial help from the local government. The financial problems became worse while Raj was serving as CEO. In addition, the home repeatedly was cited for violations of the state health code at a rate three times the average for the state. Billing records and patient medical records were disorganized, and financial information was not tracked with the exception of a monthly review of the bank statements. As a result, the home failed to collect over $500,000 owed to it by patients. Two patients died under suspicious circumstances and shortly thereafter the nine- member Board of Directors voted to close the home. Several shareholders sued Raj, alleging that they would have received more of a payout in the closure of the company if Raj had been more diligent as CEO. Did Raj breach her duties as an officer of the corporation? Identifying the Facts and Issues Officers of a corporation are considered to be. (fiduciaries, directors, trustees) of the corporation. Raj, as an officer of Washington Retirement Home, INC., owned the corporation a duty of care, which means she must act_ (with responsible intentions, in good faith, perfectly), exercise the care of an ordinary. (prudent, intelligent, faithful) person, and act in the (best, short-term, ordinary) interests of the corporation. Officers have a duty to make. was an officer of Washington, the company. (informed, absolute, perfect) decisions. While Raj (did, did not) keep accurate (failed to financial records. As a result of the record keeping, Washington collect, collected) (over $500,000 in income. A failure to keep accurate records and the resulting lack of collections_ (would not be, would be) considered negligence by the officer. Washington's shareholders alleged that they were paid_ (too little, the right amount, too much) when the business closed. If the shareholders suffered financial harm because of Raj's actions, Raj. (would, would not) be liable for negligence unless (business judgment, insider trading, officer protection) rule applies. This the rule applies as long as the officer took (reasonably, perfect, possible) steps to be (rational, hypothetical) basis for a decision, informed about problems, had a and (did, did not) have a conflict between personal and company interests. In these circumstances, it (is, is not) likely that the business judgment rule will apply. In analyzing Raj's actions, it is most likely that Raj. (did, did not) breach her duty of care to the corporation. What if the facts were different? Assume that Raj held regular meetings with her staff and reviewed financial statements. The lack of collection was related to her Chief Financial Officer's inability to track specific charges to patients. For this question, assume that the Chief Financial Officer hid that failure from Raj by preparing financial statements that appeared comprehensive and that in the review of financial statements, the CFO answered Raj's questions with reasonable-sounding explanations. With regard to the finances of the company, did Raj violate her fiduciary duties? In this situation, Raj had (regular, no) meetings with her CFO and asked (reasonable, no) questions. Raj performed reviews of the financial statements. Raj likely. fiduciary duties. (reasonable, no) (did, did not) violate her