–OAO- Relax is a company that operates a chain of hotels and leisure centres in several towns and cities throughout Russia. Last year, –OAO- Relax appointed Tamara, a new chief executive officer, who persuaded the board of directors to diversify the business by setting up a chain of health clubs. Despite scepticism in the media and opposition from some of the shareholders, Tamara proceeded with the plans.The outcome of the diversification has been a disaster. The health clubs failed to attract sufficient business to cover their costs and proved to be a drain on the company’s resources. –OAO- Relax is faced with the prospect of closing down the health clubs, or selling off this part of the business at a huge loss.A group of shareholders that collectively holds 8% of the shares in –OAO- Relax believes that the initiative has caused irreversible damage to the company. They have been backed by three of the company’s ten directors, who consistently opposed the initiative only to be outvoted by their colleagues on the board. These directors argue that their colleagues who backed Tamara’s ideas made no real effort to understand the market and simply went along with Tamara’s proposals. These directors are willing to provide documentary evidence that the decisions that were taken were based on incomplete and inaccurate information.Required:
(b) Discuss the potential accountability of Tamara and the other directors of –OAO- Relax for the losses sustained by the company. (5 marks)
