Chapter 18, Problem 2RE

Summary Introduction

Case summary: Person DB was a director in company FBF which owned a branch of fitness club in Mexico. DB owned 15 percent of the total stock of the company FBF and was also holds the position of a tanning technician at one of the fitness clubs in the city. According to finance report, FBF was facing financial loss. ML discussed terminating the tanning operation. DP who was one of shareholder discloses that DB owned stock in company S from which FBF purchased its tanning equipment. DB and MV owned 37 percent of FBF also held shares of the company S and voted to replace ML from the board of directors.

To find: The share of DB in S establishes a conflict of interest.