Tom Hanks is a successful actor and serial entrepreneur in the film industry. As

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Tom Hanks is a successful actor and serial entrepreneur in the film industry. As a teenager, Tom started his first company and sold it in 3 years for $50 million. He subsequently sold his second venture for over $300 million. In addition to his movie career, Tom is currently the CEO of a third business venture, Tom Hanks, Inc. Tom Hanks, Inc. is a startup movie company that aims to capitalize on the straight to DVD film market    As a result of his business success; Tom has decided to offer his services as “rent-a-CEO” for inexperienced companies in the film industry. The idea is that struggling companies will hire him as their chief executive officer (CEO). He will then act as the company’s full-time CEO for approximately 3 - 4 months, turn the company around, hand over responsibility to a new CEO and move on to the next company.

From 2012-2013, Tom used his role as “rent-a-CEO” to successfully pull multiple new film companies back from the edge of bankruptcy. In April 2014, Tom is asked by The Crappy Movie Company, Inc. to act as its CEO. Falsely believing that any idiot with a camera can direct and market a straight to DVD movie starring college dropouts with absolutely no acting experience (7% on rotten tomatoes is not a good thing), Crappy Movie Company is in dire need of expert help. While the Crappy Movie owners have some collateral that can be used to secure further bank loans, their parents are unwilling to loan them anymore money. However, several investors are willing to make a substantial financial contribution to the company if Tom can turn business around. In addition to other job responsibilities, one of Tom’s main tasks will be to attract his actor friends to star in Crappy’s Movies (he’s Tom Hanks, they owe him one). short respond

As Tom’s lawyer, he has asked you for advice on any potential legal ramifications of his “rent-a-CEO” idea. Think carefully about the steps a CEO might take to help turn around a company, the kind of information that a CEO is likely to see and to create, and the legal consequences of multiple successive employment stints. Please confine your answers to our materials on corporate law fiduciary duties (i.e. contracts and IP issues are not relevant here).

Explanation / Answer

A fiduciary is a person who acts on behalf of another person or persons and is responsible for managing the assets, funds, or businesses of others.

Now, Tom Hanks takes on a fiduciary duty when he takes the role of temporary CEO. He is supposed to manage the business for the benefit of the shareholders and owners of the company.

A CEO, usually, has 3  fiduciary duties - the duty of care, the duty of loyalty and the duty of disclosure. The duty of care means that the CEO has a responsibility to understand and evaluate the company's day to day operations. The duty of loyalty means that the CEO is required to act while keeping in mind the best interest of a business's shareholders. Conflict of interests should be avoided. Duty of disclosure means that CEO should inform the owners and shareholdres about major issues.

Now, the most likely legal ramification can arise due to the 'duty of loyalty' clause. As Tom is working on different firms, one after the other, there can be possible situations where conflict of interests can arise. Tom has a direct business interest in the straight to DVD film market through his organization Tom Hanks, Inc. Now, as Tom is handling multiple interests and few of his role will be in the straight to DVD film market (like in the Crappy Movie Company case), there could be a possibility that his motivation as a temporary CEO is corrupted. It may lead to situations where Tom acting as a temporary CEO makes judgements or takes decisions that are influenced by his other interests (i.e. interests other than that involved in his role of a temporary CEO). It may lead to Tom putting more weight on his other interests and secondary interests and ignoring his interests that are involved in his role as a temporary CEO.

Thus, Tom can be sued when he undermines his impartiality when there is clash between his interests as a temporary CEO and his self interests.

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