The business judgment rule is important because it reflects the principle that ________, not _________, have the greatest latitude to run companies. a. shareholders; company directors b. managers; company directors c. shareholders; managers d. company directors; shareholders
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Answer: d. company directors; shareholders
The business judgment rule is a legal principle which holds that the decisions made by a company's board of directors should not be subject to challenge by the shareholders as long as the directors acted with reasonable care, in good faith, and in the best interests of the corporation. The rule acknowledges that company directors, who have the responsibility of managing the affairs of the company, are best positioned to make decisions on behalf of the business. It is thus a presumption that in making a business decision, the directors of a company acted on an informed basis, in good faith, and in the honest belief that the action was in the best interests of the company, thus shielding them from liability.