1. Smith owns 75 percent and Jones owns 25 percent of the outstanding stock of the ABC Corporation. Smith is also the president of the corporation. ABC pays Smith a salary that is significantly more than the salaries of presidents of comparable companies and significantly more than justified by the operating profits of ABC. Because of the salary, ABC is not able to pay the shareholders dividends. Smith used her or his ownership of 75 percent of the stock to justify the payment of the salary. Jones has sued Smith for the financial damages caused to the corporation by the payment of Smiths excessive salary. Will Jones be successful? Explain and identify the legal duty involved in the outcome. (Limit your answer to three sentences.)

2. The ABC Corporation made an offer of merger to the XYZ Corporation that valued each share of stock in XYZ at $55 per share. The CEO of XYZ called a meeting of the board of directors to discuss the proposal. An independent investment bank, hired by the board, advised the board not to accept the $55 price, based on the belief that the economy would improve in the near future and that XYZ would then be able to demand a higher price. The investment banks determination was based on its interpretation of certain economic indicators. After a seven- hour meeting, the board approved the merger, based on its own good faith assessment that the economy would not substantially improve in the near future. The board relied on a broader set of economic indicators than the investment bank did. All board members are experienced business people who are knowledgeable about the economy. Shareholders of XYZ sued the individual members of the board, claiming that the shares in XYZ were undervalued. Assuming that the prediction of the investment bank was correct, are the board members individually liable to the shareholders of XYZ for the undervaluation of the stock price? (Limit your answer to five sentences.)