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legal environment of business


Heimdall Corporation’s board of directors hired a new CEO, Essa Alharbi. The Executive Search Firm that hired him found that in their search of over 200 candidates, he was the most qualified. He had extensive experience in helping businesses succeed. After the Board of Directors hired him, 11 months into the job, the company experienced significant losses in revenue and market share. As a result, the Board forced him to resign but paid him a handsome sum to leave the company, as was customary in this situation. A group of shareholders filed a lawsuit against the Board of Directors indicating that they were liable for the hiring of the incompetent CEO, and demanding they reimburse the shareholders for their losses due to his actions.

Are the members of the board liable for hiring Mr. Alharbi, and for the losses of the company?

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