Book Opener

Shareholder SuitsA shareholder suit was filed in U.S. District Court in New Jersey againstLucent Technology. The suit claimed that certain corporate executives issuedmisleading statements to the market about earnings. These statements servedto artificially boost the price of Lucent’s stock. Lucent announced at one pointthat its earnings would be good. A few weeks later it announced just theopposite. Statements about a company’s performance that might affect stockprice must be accurate. Shareholders have a right to protect the value oftheir shares of stock from misleading company statements. (Source: CRN,November 30, 2000)Connect Visit the Web site of a publicly traded company and search for itsmost recent earnings report. Next, search the Web to see if the company metearnings estimates, and if not, if the company may have previously made anerror in estimating its earnings.Example 6. Edward Costello, president of Doublestone Corporation,learned that Riversarian, Inc. was selling several lots ofprime real estate at reduced prices. The president knew that Doublestonehad been trying to buy the land to expand operationsfor several months, but he could not buy the land for himselfwithout first telling the other officers and the directors of theopportunity.The only exception to this rule is if the director or officer knowsthat the corporation is financially incapable of taking the opportunity,despite its interest. In such a situation, the director or the officer wouldbe permitted to take the opportunity without violating the doctrine.Managing a LimitedLiability CompanyIn a limited liability company, the owners can either manage thefirm on their own, or they can choose to enlist the services of outsideadministrators.Member-Managed LLCsAs the name suggests, the owners themselves run member-managedLLCs. Management authority is apportioned based upon the money638 Unit 6: Starting a Business