in which of the following would the business judgment rule not help a manager escape liability? choose 2 answer choices.

Category :

James

Guys, does anyone know the answer?

get in which of the following would the business judgment rule not help a manager escape liability? choose 2 answer choices. from EN Bilgi.

Business Law

Start studying Business Law - Chapter 34. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

Business Law - Chapter 34

5.0 1 Review

11 studiers in the last hour

The formation of larger manufacturing enterprises during the Industrial Revolution required greater capital investments, leading to

Click card to see definition 👆

the separation of business ownership and management in many cases

Click again to see term 👆

Directors and officers are both corporate managers.

Click card to see definition 👆

True

Click again to see term 👆

1/41 Created by TiannaK12

Terms in this set (41)

The formation of larger manufacturing enterprises during the Industrial Revolution required greater capital investments, leading to

the separation of business ownership and management in many cases

Directors and officers are both corporate managers.

True

_________ elect _________ who set __________ and then directors appoint ________ to _________ these corporate goals.

Shareholders directors policy officers implement

Only directors of corporations incorporated in Delaware may consider the interests of stakeholders when making business decisions.

False

The Unocal decision is significant because the Court:

permitted directors to consider the interests of stakeholders when making business decisions, whereas previously directors could only consider the corporation's shareholders' interests.

The business judgment rule is

a common law concept that has achieved national acceptance

The business _________ rule protects both the ____________ and her __________. If a manager acted __________, a court will not hold her ____________ for any harm her decision causes the company, nor will it ___________her decision. If the manager breached her __________, then she ______________ her decision was __________ to the ____________.

judgment manager decision in good faith personally liable rescind fiduciary duty

has the burden of proving that

entirely fair shareholders

Which of the following are goals accomplished by the business judgment rule?

Encourages directors to serve

Permits directors to do their jobs

Keeps judges out of corporate management

__________ occurs when a manager makes a decision ___________ either ___________ or another company __________.

Self-dealing benefitting herself

with which she has a relationship

A manager who engages in self-dealing is automatically liable to the corporation and the shareholders.

False

Sign up and see the remaining cards. It’s free!

Boost your grades with unlimited access to millions of flashcards, games and more.

Continue with Google

Continue with Facebook

Already have an account?

Sets with similar terms

chapter 34

66 terms reillywolski

Chapter 22: Corporations

16 terms maya_hardman

Chapter 34 "Corporate Management"

12 terms KatyaKitar

Business Law Chapter 35

40 terms lexih94

Sets found in the same folder

Business Law - Chapter 33

54 terms TiannaK12

Business Law - Chapter 28

60 terms TiannaK12

Business Law - Chapter 35

44 terms TiannaK12

Chapter 5: MindTap Worksheets

37 terms bgakers

Other sets by this creator

Business Law - Chapter 22

46 terms TiannaK12

Accounting 350 - Chapter 13

10 terms TiannaK12

Accounting 350 - Chapter 12

9 terms TiannaK12

Business Law - Chapter 16

52 terms TiannaK12

Other Quizlet sets

BIOL114 FINAL

138 terms Ldeininger

PHIL Final Questions (from quizzes)

17 terms isabellapate

Women's Physiology: Chapter 4

18 terms madison_davis146

DB&B Lecture 12: Caffeine

22 terms Bwulfofawesomeness

Business Judgment Rule Definition

The business judgment rule helps to insulate a corporation's board of directors from frivolous allegations about the way it conducts business.

INVESTING LAWS & REGULATIONS

Business Judgment Rule

By ADAM HAYES Updated March 25, 2021

What Is the Business Judgment Rule?

The business judgment rule helps to guard a corporation's board of directors (B of D) against frivolous legal allegations about the way it conducts business. A legal staple in common law countries, the rule states that boards are presumed to act in "good faith"—that is, within the fiduciary standards of loyalty, prudence, and care directors owe to stakeholders. Absent evidence that the board has blatantly violated some rule of conduct, the courts will not review or question its decisions.

Fiduciary standards include the "duty of care" and the "duty of loyalty." The first is an obligation to act on an informed basis. The second requires directors to put the interests of the corporation and over their own self-interest or the interests of others.

KEY TAKEAWAYS

The business judgment rule protects companies from frivolous lawsuits by assuming that, unless proved otherwise, management is acting in the interests of the corporation and its stakeholders.

The rule assumes that managers will not make optimal decisions all the time.

Unless it's clear that directors have violated the law or acted against the interests of the firm and its stakeholders, courts will not question their decisions.

0 seconds of 0 secondsVolume 75%

1:23

Bad Faith Insurance Definition

Understanding the Business Judgment Rule

The business judgment rule acknowledges that the daily operation of a business, as well as its long-term strategy, requires making controversial decisions or taking actions that put the company at risk. All business decisions are to some extent risky, whether they involve starting a new line of business or buying another company. Generally speaking, higher profits require taking greater risks.

The principle underlying the rule is that the B of D should be allowed to make such decisions without fear of prosecution by shareholders who might object. The rule assumes that it is unreasonable to expect managers to make optimal decisions all the time. As long as a court believes that directors are acting rationally and in good faith, it will take no action against them.

Example of the Business Judgment Rule

Say that XYZ Company's board is considering shutting down a particular product line. Profit margins on the product have been shrinking and the product is becoming extremely costly and eating into revenues from other business lines.

The board decides that discontinuing the product would free up resources necessary to focus on more profitable areas. In this case, the business judgment rule protects directors from prosecution by shareholders who disagree with their decision or who are adversely affected by it.

Exemptions to the Business Judgment Rule

By contrast, there are instances in which director decisions can end up in the courts. For example, a director sells a company asset to a family member for an unjustifiably low price. This would be an example of self-dealing that the rule would not insulate from prosecution.

In order to challenge the presumption that is the heart of the rule, plaintiffs must show evidence that directors have acted in bad faith. This might include engaging in fraud, committing a breach of trust or creating a conflict of interest, abdicating corporate responsibility, or failing to investigate unethical corporate behavior that is obvious when committed.

Compete Risk Free with $100,000 in Virtual Cash

Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you're ready to enter the real market, you've had the practice you need. Try our Stock Simulator today >>

Compare Accounts

Related Terms

What Is Duty of Care?

Duty of care is a fiduciary responsibility that requires company directors to make decisions in good faith and in a reasonably prudent manner. more

What Is a Fiduciary?

A fiduciary is a person or organization that acts on behalf of a person or persons and is legally bound to act solely in their best interests. more

Reasonableness Standard Definition

Reasonableness standard has several applications in finance that relate to requiring expectations placed upon a party are considered reasonable. more

Fiduciary Negligence

Fiduciary negligence is professional malpractice when a person fails to honor their fiduciary obligations and responsibilities. more

What Is Accountant's Liability?

Accountant's liability stems from legal exposure assumed while performing an audit or corporate accounting services. more

What Is Self-Dealing?

Self-dealing is when a fiduciary acts in their own best interest in a transaction rather than in the best interest of their clients. more

Partner Links

SEC

How The SEC Tracks Insider Trading

Click To See More

Source : www.investopedia.com

The Business Judgment Rule and the Trans Union Case on JSTOR

Daniel R. Fischel, The Business Judgment Rule and the Trans Union Case, The Business Lawyer, Vol. 40, No. 4 (August 1985), pp. 1437-1455

JOURNAL ARTICLE Daniel R. Fischel The Business Lawyer

Vol. 40, No. 4 (August 1985), pp. 1437-1455 (19 pages)

Published By: American Bar Association

https://www.jstor.org/stable/40686696

Read and download

This article analyzes the rationale of the business judgment rule and its application in the Trans Union case.

The Business Lawyer is the premier business law journal in the country, circulating to approximately 60,000 readers. It contains articles of significant interest to the business lawyer, including case law analysis, developing trends and annotated listings of recent literature.

With nearly 400,000 members, the ABA provides law school accreditation, continuing legal education, information about the law, programs to assist lawyers and judges in their work, and initiatives to improve the legal system for the public.

This item is part of a JSTOR Collection.

For terms and use, please refer to our Terms and Conditions

Request Permissions