It is not the consequences, but the circumstances under which Dog House found itself in a dire financial situation that lead to the conclusion that Jerry Teal’s conduct was unethical, as it violated professional standards in business law. First, the landlord took advantage of his position and misappropriated company funds. Second, he used a corporate entity to perpetrate fraud, as he recovered money from the insurance property of Teal Properties, but did not pay that money to Dog House.
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In other words, Jerry Teal abused a corporate privilege for his own benefit. As a result, the personal interests of Mr. Teal and the corporate interests of the company became commingled, so the latter appeared to have no separate identity (Carroll and Buchholtz 418). However, even if Teal Properties did not reimburse the tenant for the repair costs and Dog House did not end up in a bad financial situation, the conduct of Mr. Teal would still be unethical.
Based on the definition of a shareholder’s derivative suit, it is possible to say that corporations can be expected to benefit from this type of litigation. This is because a shareholder’s derivative suit is brought against a third party whose actions are considered to have harmed the corporation. Specifically, corporate directors and officers can take advantage of their positions, thus causing harm to the corporation (Miller 739).
For this reason, it is clear that these persons would be unwilling to bring a lawsuit against themselves. A shareholder’s derivative suit allows a minority member to start litigation which can result in recovering damages caused by officers whose conduct did harm to a corporation. Since such a lawsuit is brought on behalf of a company, all the damages recovered go into corporate funds.
Carroll, Archie, and Ann Buchholtz. Business and Society: Ethics, Sustainability, and Stakeholder Management. Nelson Education, 2014.
Miller, Roger LeRoy. Business Law Today: Text & Summarized Cases. 11th ed., Cengage Learning, 2017.