Business Judgment Rule Research Articles

The Fiduciary Duty of Corporate Directors to Protect the Environment for Future Generations

The ‘business judgement rule’ requires corporate directors only to act with honesty and reasonable care in the interest of shareholders. A stronger ‘fiduciary’ duty is required where one party requires protection from another. This paper argues that where corporations take risks with the environment, directors are fiduciaries. Stakeholders are in that case the general public, future generations and other species, which have not voluntarily accepted risk and cannot limit liability. Recognition of fiduciary duty in such cases is consistent with recent trends in the law of equity. It would require all economic activities to move from open to closed (sustainable) systems.

The Fiduciary Duty of Corporate Directors to Protect the Environment for Future Generations

The ‘business judgement rule’ requires corporate directors only to act with honesty and reasonable care in the interest of shareholders. A stronger ‘fiduciary’ duty is required where one party requires protection from another. This paper argues that where corporations take risks with the environment, directors are fiduciaries. Stakeholders are in that case the general public, future generations and other species, which have not voluntarily accepted risk and cannot limit liability. Recognition of fiduciary duty in such cases is consistent with recent trends in the law of equity. It would require all economic activities to move from open to closed (sustainable) systems.

Business judgment v. audit judgment: Why the legal distinction?

This paper explores the legal contrast between the well-established “business judgment rule” and a comparable, although nascent, “audit judgment rule”. The business judgment rule often appears in litigation against corporate directors but not in litigation against public auditors. The audit judgment rule has never been voiced or cited explicitly in a case against auditors, but it can be inferred from court opinions. From the contextual background of multi-disciplinary research issues, this study focuses on the question of legal distinction and restricts the inquiry to case law in the United States. Expertise and professionalism are at the center of concern. The first three sections explore the precedential link between burden of proof and standard of care. The first section reviews “burden of proof” as a jurisprudential ground for contrasting the business judgment rule, described in the next section, and the audit judgement rule, inferred in the third section. The different legal “rules” derive from different legal presumptions about the different standards of care (i.e. duties) required of corporate directors and of public auditors. In general, case law has placed a higher burden of proof for plaintiffs against corporate directors upon whom rests a duty of care that is a less detailed and more general standard of behavior. Correlatively, precendent has allowed a lower burden of proof for plaintiffs against auditors upon whom rests a duty of care that is more detailed (i.e. higher) than is the standard behavior required of corporate directors. Therefore, corporate directors have an easier defense in litigation than public auditors have. The different economic roles of directors and auditors are considered thereafter, with some implications of these roles as possible justification for the different legal precedents. The concluding section comments on recent trends and raises a crucial legal question for corporate audit committees.

Directors’ Duty of Care and the Business Judgment Rule: American Precedents and Australian Choices

Regardless of local differences in detail, directors occupy a central position in systems of corporate law. Significant and pervasive questions surround the expectations defined by the law for directors’ performance in office, along with the circumstances under which directors incur personal liability. This essay begins by explaining the development, in the United States, of the law defining the duty of care a director owes to a corporation, along with the circumstances under which a director will be personally liable for breaching that duty. It then examines the relevance of these developments to the current Australian context.

Statutory limits on director liability

I n the race to limit director liability, traditional favorite Delaware is getting some tough competition from other state legislatures, all seemingly intent on shrinking director liability to the point that no shareholder, and certainly no judge, will be able to find anyJ Until recently the Business Judgment Rule was a virtual citadel that shielded board members from liability in decisions that were consistent with advancing shareholder interests, due care, good faith, and loyalty. Before it becomes a relic, one might peruse the Rule in its conventional form:

Corporate Auctions and Directors' Fiduciary Duties: A Third-Generation Business Judgment Rule

Corporate Auctions and Directors' Fiduciary Duties: A Third-Generation Business Judgment Rule

The Demand Requirement and the Business Judgment Rule: Synergistic Procedural Obstacles to Shareholder Derivative Suits

The Demand Requirement and the Business Judgment Rule: Synergistic Procedural Obstacles to Shareholder Derivative Suits

Golden Parachutes and the Business Judgment Rule: Toward a Proper Standard of Review

Golden Parachutes and the Business Judgment Rule: Toward a Proper Standard of Review

Stock Option Plans and the Business-Judgment Rule in Delaware

Stock Option Plans and the Business-Judgment Rule in Delaware