The Lawletter Vol 39 No 11
In a classic formulation, the "business judgment rule" is defined as "a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company." Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (emphasis added), overruled on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000). The business judgment rule plays a crucial role in protecting corporate directors from liability for business decisions, because "[a]bsent an abuse of discretion, th[eir] judgment will be respected by the courts" and the burden to establish facts rebutting the presumption is on the party challenging the decision in question. Id.
The question of whether the business judgment rule should also apply to protect business decisions made by corporate officers has been the subject of much academic debate. See generally Amitai Aviram, Officers' Fiduciary Duties and the Nature of Corporate Organs, 2013 U. Ill. L. Rev. 763, 766 & n.15 (2013) (collecting articles). However, the issue has not been addressed in many cases. In those cases in which the question has been presented, the courts have given the issue little attention in consistently holding that the business judgment rule does not apply to corporate officers.Read More