The Business Judgment Rule
There's a post up over at TCS Daily about the business judgment rule. The business judgment rule provides deference to corporate officers' decisions that are made reasonably and in good faith. It is, in essence, a precaution against second guessing with the benefit of hindsight. Instead, courts look to the diligence and competence that directors and officers demonstrated at the time their decisions were made. That said, there's a fine line between deference and ignorance, and the courts need not and can not turn a blind eye when corporate officers carelessly toss away shareholders' money. The Disney shareholder suit over a $140 million severance package paid to Michael Ovitz looks to clarify where that fine line is. (Found via the Modesto Business Law Blog).