Directors and Officers – Duty of Care - The Business Judgment Rule Flashcards
1
Q
As long as a corporation’s directors can show a _____ business _______ for their decision, that decision will be given great ________ by the courts.
A
As long as a corporation’s directors can show a VALID business PURPOSE for their decision, that decision will be given great DEFERENCE by the courts.
2
Q
Can a single aggrieved shareholder sue a board of directors alleging that the board is not maximizing profits?
A
No. A corporation’s president and board have authority to determine what course of action is best for the business. While the president and board must have a valid business purpose behind their actions, a decision motivated by a valid business purpose will be given great deference.
