A QUESTION OF ETHICS: Duties of Directors and Offi cers. New Orleans Paddlewheels, Inc. (NOP), is a.

A QUESTION OF ETHICS: Duties of Directors and Offi cers.
New Orleans Paddlewheels, Inc. (NOP), is a Louisiana corporation formed in 1982
when James Smith, Sr., and Warren Reuther were its only shareholders, with each
holding 50 percent of the stock. NOP is part of a sprawling enterprise of
tourism and hospitality companies in New Orleans. The positions on the board of
each company were split equally between the Smith and Reuther families. At
Smiths request, his son James Smith, Jr. (JES), became involved in the
businesses. In 1999, NOPs board elected JES as president, to be in

A QUESTION OF ETHICS: Duties of Directors and Offi cers.
New Orleans Paddlewheels, Inc. (NOP), is a Louisiana corporation formed in 1982
when James Smith, Sr., and Warren Reuther were its only shareholders, with each
holding 50 percent of the stock. NOP is part of a sprawling enterprise of
tourism and hospitality companies in New Orleans. The positions on the board of
each company were split equally between the Smith and Reuther families. At
Smiths request, his son James Smith, Jr. (JES), became involved in the
businesses. In 1999, NOPs board elected JES as president, to be in charge of
dayto-day operations, and Reuther is chief executive offi cer (CEO), to be in
charge of marketing and development. Over the next few years, animosity
developed between Reuther and JES. In October 2001, JES terminated Reuther as
CEO and denied him access to the offi ces and books of NOP and the other
companies, literally changing the locks on the doors. At the next meetings of
the boards of NOP and the overall enterprise, deadlock ensued, with the directors
voting along family lines on every issue. Complaining that the meetings were a
waste of time, JES began to run the entire enterprise by taking advantage of
an unequal balance of power on the companies executive committees. In NOPs
subsequent bankruptcy proceeding, Reuther fi led a motion for the appointment
of a trustee to formulate a plan for the fi rms reorganization, alleging,
among other things, misconduct by NOPs management. [ In re New Orleans
Paddlewheels, Inc., 350 Bankr. 667 (E.D.La. 2006)]

(a) Was Reuther legally entitled to have access to the books
and records of NOP and the other companies? JES maintained, among other things,
that NOPs books were a mess. Was JESs denial of that access unethical? Why
or why not? (b) How would you describe JESs attempt to gain control of NOP and
the other companies? Were his actions devious and self-serving in the pursuit
of personal gain or legitimate and reasonable in the pursuit of a business
goal? Discuss.