Whitewash Resolution

A whitewash resolution is a resolution passed by a corporation's board of directors that purports to investigate and exonerate the corporation's management from wrongdoing. Whitewash resolutions are often used to deflect attention from allegations of corporate misconduct and to protect the corporation's reputation.

Whitewash resolutions are typically drafted by the corporation's management and are approved by the board of directors without any input from shareholders or other stakeholders. The resolutions typically contain a number of boilerplate provisions, such as a statement that the board has conducted a thorough investigation of the allegations of wrongdoing and has found no evidence of wrongdoing.

Whitewash resolutions are often criticized for being a sham. Critics argue that the resolutions are designed to protect the corporation's management from accountability and to prevent shareholders from holding the corporation's management accountable for their actions.

In some cases, whitewash resolutions have been challenged in court. In one case, a shareholder of a company that had been accused of securities fraud sued the company and its directors for approving a whitewash resolution. The court held that the resolution was invalid because it was not supported by the evidence.

Despite the potential for legal challenges, whitewash resolutions continue to be used by corporations to deflect attention from allegations of wrongdoing. Shareholders and other stakeholders should be aware of the potential for whitewash resolutions and should be vigilant in monitoring corporate conduct.

In addition to the potential for legal challenges, whitewash resolutions can also have a negative impact on a corporation's reputation. When a corporation is accused of wrongdoing and then passes a whitewash resolution, it sends a message to the public that the corporation is not committed to accountability. This can damage the corporation's reputation and make it more difficult to attract investors and customers.

For these reasons, it is important for corporations to avoid using whitewash resolutions. If a corporation is accused of wrongdoing, it should conduct a thorough investigation of the allegations and take appropriate action to address any wrongdoing that is found. If the corporation does not take appropriate action, it risks damaging its reputation and its ability to attract investors and customers.