Business Judgment Rule

(redirected from Business Judgement Rule)
Also found in: Legal.

Business Judgment Rule

In American business law, the concept granting members of the board of directors of a corporation the presumption that they intend to work for the company's profitability, provided they act in good faith. That is, courts assume boards of directors think they are doing the right thing even if an act harms the company in retrospect. This protects members from shareholder lawsuits in the event their actions do not go as planned. On the other hand, if a board of directors is found to have squandered the company's resources by, for example, grossly overpaying when buying or receiving far too little when selling assets, it may still be found legally liable.
References in periodicals archive ?
A business judgement rule should not insulate directors
(51) Second, the Court understood that trustees by reason of sanction may become fearful of making business judgments if these decisions can later be "open to serious criticism by obstreperous creditors aided by hindsight." (52) The Court remarked that "[c]ourts are quite likely to protect trustees against heavy liabilities for disinterested mistakes in business judgment." (53) It appears that the Court would approve of judicial protection for trustees, much in the same way it does for corporate directors, by employing the business judgement rule. (54) Finally, the Court implied that disclosure will limit, if not foreclose, personal liability for the trustee.
In this case, the OSC characterized the asset option as being "unusual." Business Judgement Rule The validity of the agreement which raised these issues was then dealt with by Mr.
Justice Silverman ruled that although decisions of a cooperative board are largely insulated from judicial review under the "business judgement rule," the rule is not absolute, and a court may find that it can review the board's actions where the acts of the board of directors are beyond the authority granted to the board, done in bad faith or discriminatory.
(22) Bayless Manning, The Business Judgement Rule and the Director's Duty of Attention: Time for Reality, 39 BUS.
Full browser ?