Volume 5, Issue 2, December 2015 Juridical Tribune
by courts when assessing the corporate directors' conduct.
Although the Business
Judgment Rule comes into play with respect to all these three obligations
, it is
closely associated with the duty of care. In essence, the duty of care requires
directors to act with the same degree of care that a n ordinary careful and prudent
person would have in similar circumstances. By invoking the phrase "reasonable
care (attention)", the duty of care would be violated every time a director acted
The Business Judgment Rule is the central doctrine of Business Law,
which penetrates and affect the roles of managers, board members and of
shareholders with significant power of control. The doctrines referring to this rule
is among the most heterogeneous institutions, theoretical assertions and the
justification to regulate this Rule are not uniform, nor in Common Law or in
continental European systems and this gap has important theoretical and practical
In the American and British case law, two approaches of the Business
Judgement Rule are dominant. The first version appertains to the Rule as a standard
of liability by which the courts take an objective examination of the merits of board
decisions. The second interpretation regards this rule as an Abstention Doctrine
pursuant to which courts simply refuse to analyze board decisions in certain
individual cases. The distinctions between the two applications of the Rule has
major consequences. By the second interpretation, for example, it is very likely that
the shareholders' claims against the board of directors will lead to the conclusion of
, affecting decisively the ruling of the courts and the effects on
the parties trying to resolve the dispute.
In line with the evolving case law in the early 2000s, the Business
Judgment Rule was regarded as a standard of analysis based on the corporate
One of the first express mentions of this triad of fiduciary duties in the manner it is viewed by the
majority doctrine and jurisprudence nowadays is reflected in the justifications of the Case Aronson
vs. Lewis, 473 A.2d 805, 812 (D elaware, 1984).
The clear separation of this t riad was rather tumultuous, a reference Case is Walt D isney Co.
Derivative Litig. (Disney IV), 907 A.2d 693, 754 (D el. Ch. 2005).The disput e focused on Disney's
board of directors failure to complain with the fiduciary dut ies in connection with determining the
terms of employ ment of the CEO and with his compensation clause at the time of repealing his
mandate absent any fault. T he court concluded that the p rotection of the manager disappears only
when his gross negligence is proved (unint elligent business decisions or t hat lack counseling, lack
of the minimum step s toward information), bad faith, or if the decision cannot be attributed to any
commercially rational p urpose. In these cases, t he manager is the one who will need to actively act
by reversing the burden of proof and showing that he made a fair and equitable decision in for the
company and for the shareholders.
„Abstention doctrine” is t he older interpretation of the Rule, which is becoming increasingly
pop ular in American corporate case law. This concept was initiated and developed by Professor
Stephen B. Bainbridge, University of California School of Law, one of t he most prominent voices
of corporate governance and fiduciary obligations.
According to art. 439 of the Civil Procedure Code, t hese transactions can also be concluded in the