[En Passant]

I had to write a response paper to each of these questions for one of my law classes, legal issues in corporate governance. I have completed them, but I found them to be very insightful and am interested to know what you people think.

1. Company A has a board of directors made up of nine people. One of board members applying for reelection serves on the board of another company, company B. Every board member of company B has been sued for fraud; however, these are just allegations. A complaint has been filed, but no discovery has been found. When the proxy statement is released for this upcoming year, should it disclose that this board member is a defendant in security fraud litigation case?

Kirk Kerkorian, president and CEO of Tracinda Corporation, has lunched an overture to buy two properties in Las Vegas: The Bellagio Hotel and the still-being-constructed City Center Project. The deal is worth $12 billion dollars. The owner of both the Bellagio Hotel and the City Center project is the MGM Grand. Kekorian also happens to be a member of the board of MGM and is also its largest shareholder. What does the MGM board do?

3. Corporation A is a venture capital backed company that has raised $40 million. Jane Smith, who serves on the board, is a member of a venture capitalist firm. She invested $25 million of the original $40 million. Out of cash and near bankruptcy, Corporation A will shut down in one month if it cannot raise more investment dollars. Jane Smith offers to invest $10 million (which will be enough for the company to operate for one more month) for an 80% stake in the company. They know it’s a related party transaction. Keep in mind she is a majority owner to begin with. What should board do?