Question

Locate the U.S. Business Judgment Rule then locate the rule in any other country

1. What part or parts of the U.S. rule do you either agree or disagree?

2. Compare/contrast the U.S. with your selected country. If they are the same, why do you think they are stated in similar ways. If different, discuss the differences.

If you could change the U.S. rule, what would you change and why?

If you would not change anything in the U.S. rule, discuss what aspects of thr rule you believe are modt effective and why? citations for all materials used

Answer 1

I agree with the concept of the rule IF after the presented evidence and investigation, it is proven with facts that the officers, directors, managers, and/or other agents of a corporation took a decision based on the interest of the shareholder and the corporation, were well informed and took the time to analyze the circumstances and consequences (positive and negatives) of the decision made. If the facts indicate that they acted in good faith, then they should not be found liable because someone else at this position should have made the same decision. However, I truly consider that there must be a very extensive and detailed investigation before the Business Judgement Rules applies. Also, the duties of the offices should be clearly outlined by the company on the officers’ contracts - and the American BJR should consider the contract as part of the investigation before making a final case decision. Moreover, the American BJR should be reviewed or amended to state at least the main duties expected from officers by shareholder. In countries like China and Australia, the BJR states general duties of care, diligence, and good faiththat officers must fallow; therefore, more regulations are present to secure shareholders’ interests. For instance, the American BJR can go more specific by saying that a negligent breach of duty by a board member that relied on external expert advicecan only be excluded, if (1) the opinion of an independent and sufficiently qualified expert is heard, who (2) has been provided with all relevant facts of the case, and (3) this opinion withstands a plausibility check by the board member. The U.S. BJR can be applied more effectively if proper preconditions are listed.

The U.S. and Germany have basically the same concept for the Business Judgment Rule. The Business Judgement Rule in the U.S. is defined as“a legal principle that makes officers, directors, managers, and other agents of a corporation immune from liability to the corporation for loss incurred in corporate transactions that are within their authority and power to make when sufficient evidence demonstrates that the transactions were made in Good Faith.”Tearing this definition apart, 1) the director must act with good faith to have the protection of the business judgment rule. This means that the director must act for the benefit of the corporation as a whole, and not with his or her personal interests in mind. 2)“Prudence” suggests that the director also needs to act upon reasonable assumptions and information and only reach a final course of action after sufficient investigation that evinces due diligence on the part of the director.If all of the above conditions are met, the definition then tells us that the courts will refuse a request by shareholders, the government, or others to judge the directors harshly based on the outcome of their actions, rather than the circumstances that provoked the director’s action at the time of the decision.

The same rule is codified in the so-called German Business Judgement Rule, and it is “a recognized basic principle under German law that the management board (and the supervisory board as far as they are rendering managerial decisions) requires vast discretion in being able to successfully manage the company.”In 2009-2010,preconditions for the applicability of the Business Judgement Rule were construed and clarified by several courts. The courts held, in short, that a board member may only rely on the Business Judgement Rule if the board member has done everything possible to clarify the facts of the situation in order to be able to render an informed decision.

As I was researching several countries for this discussion, I found that the Business Judgement Rule follows the same concept in countries such as Australia, Brazil, Canada, and China, for instance. However, China and Australia have outlinedthe general duties of care, diligence and good faith within the law and more preconditions are included, which make it easier to define what decisions should be made by board members and what should not.

I believe the similarities on the BJR are due to the impact of globalization and international trades among countries, which follow a need to apply the same rules and regulations to protect the interests of the firms doing business in countries where the rules of the host country do not protect them as well as their own country do.