On The Business Judgment Rule Of American Corporation Laws

As a judicial standard on cases of director's duty of care, the business judgment rule (so called BJR) is a unique common law rule of American corporation laws. Developing and changing as the time goes by, it is hard to define this rule in a common and abstract way. The business judgment rule is not only a rule, which could be used to judge business judgment. It is also a reputable presumption, which presumed that when the directors make business judgment, they are good faith, due care, prudent, and for the best interest of the corporation.Second, it is a rule about proof burden, that the plaintiff/shareholders must prove the director is bad faith, gross negligence, self-interest dealing, waste the asset and so on. If the plaintiff fails, the judge will no do second-guess on the business judgment. The burden will change in other conditions, especially when the corporation is in the response or auction phrase of M&A cases, this rule is so called the amended business judgment rule.Last, the BJR rule is also a judicial concept, in which the judges consider: (1) The business judgment itself have commercial risk, the law is to cut down"moral risk", not commercial risk; (2) A well-done corporation governance structure is to balance the relationship between what the shareholders want and what the directors want. If the law set a more enhanced standard on directors'behavior, the corporation's interest will reduce in the end; (3) Compared to the judge, the business men and women have more professional skills, and they can do better in condition investigation, background knowing and the affairs and business judging. As a matter of fact, they really stand in a better role than the judge when make business judgments, so if the judge want to replace a businessmen's judgment with his own judgment, more deliberations should be put. Whatever, the BJR is both a"judicial deference", and a depth control of"judicial interference", which is also the reason that why it arouses my research interest.There are five parts. The first part is a definition of research scope, and it resolved the problem of"what it is". First, setting forth some cases'concerned quotation about BJR and amended BJR. Second, considering the BJR is judicial standard about duty of care, it is necessary to explain what the duty of care is, and this part is also a foreshadowing for Part 3. This part limited the scope within: BJR in mostly Public Holding Corporation, exclude derivative action, exclude insolvency condition, and only the BJR in Delaware court.Part 2 is to explain the problem of"why it is". From the approach of Economics&Law, the corporation is deemed as a series of bonds. Compared to other laws, the corporation law as a main branch of commercial law has more motive of chasing the largest interest. So in research the efficiency is a key word. With this approach, this part is trying to certificate the justness of BJR.Part 3 is to explain the problem of"who to use it". A common law rule is a alive rule, it is changeable as the time going. In order to deeply explain BJR, a useful way is to set the rule in a specific case, herein I choose the DISNEY case as an example, and set forth the meaning of Disney in post-Enron era.Part 4 is about the condition of BJR in Canada. Setting forth the same and different points. Among them, the most different point is that the Canada focuses on a reasonable standard, but the America focuses on a process standard.Part 5 is a conclusion. It is about the problem what the meaning of BJR to our country is. From the analysis of present condition, we could find the disadvantage existed in legal documents, administrative process, and justice area. Setting forth five resolutions, which are judicial concept, law transplantation, judicial approach, judicial interpretation, and mating institution.