Edgar Bronfman, Jr., dropped out of high school to go to Hollywood and write songs and produce movies. Eventually, he left Hollywood to work in the family businessthe Bronfmans owned 36 percent of Seagram Co., a liquor and beverage conglomerate. Promoted to president of the company at the age of 32, Bronfman seized a second chance to live his dream. Seagram received 70 percent of its earnings from its 24 percent ownership of DuPont Co. Bronfman sold this stockat less than market valueto purchase (at an inflated price) 80 percent of MCA, a movie and music company that had been a financial disaster for its prior owners. Some observers thought Bronfman had gone Hollywood, others that he had gone crazy. After the deal was announced, the price of Seagram shares fell 18 percent. Was there anything Seagram shareholders could do to prevent what to them was not a dream but a nightmare? Apart from legal issues, was Bronfman's decision ethical? What ethical obligations does he owe Seagram's shareholders?

1. Bronfman owes ____ to the Seagram Shareholders

duty to seek expert financial counsela duty of reasonable care, a duty of extraordinary care a fiduciary duty

2. Was Bronfman required to get shareholder approval of the sale of DuPont stock?

No, because the transaction was not a merger

No, because this transaction does not rise to the level of a fundamental change

Yes, because this transaction is a merger

Yes, because this transaction involves substantially all of Seagram's assets, making it a fundamental change

3. Was Bronfman required to get shareholder approval of its purchase of MCA?

No, because mergers do not require shareholder approval

No, because Seagram was the acquiring company

Yes, because the merger would have a major impact on Seagram's business

Yes, because all mergers require shareholder approval

4. If Jane owns a single share of Seagram stock, would she have been able to participate in any of the required votes on Bronfman's transactions?

Yes, if her stock carries voting rights

Yes, if she files a proxy statement

No, only majority shareholders may vote

No, unless she appointed a proxy

5. The Seagram corporation itself and______ have been harmed by Bronfman's actions.

Seagram shareholders

members of the public who did not purchase Seagram stock in reliance on Bronfman's actions

DuPont shareholders

MCA shareholders