Abstract

http://ssrn.com/abstract=711122
 
 

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Corporate Officers and the Business Judgment Rule


Lyman Johnson


Washington and Lee University - School of Law; University of St. Thomas, St. Paul/Minneapolis, MN - School of Law


Business Lawyer, Vol. 60, February 2005

Abstract:     
This article argues that the business judgment rule - a cornerstone concept in corporate law - does not and should not extend to corporate officers in the same broad manner in which it is applied to directors. The argument proceeds along both descriptive and normative lines. After first reviewing judicial decisions, the article concludes that, notwithstanding frequent, broad assertions to the contrary, application of the rule to corporate officers is not firmly established in case law. The article next examines the policy case by assessing three conventional rationales for applying the rule to directors and concluding, on balance, that the rationales do not fully translate into the officer context. The upshot is that courts should more closely scrutinize officer conduct than they now examine director performance. Those companies not wishing to expose officers to heightened liability risks may, by decision of the board of directors, refrain from asserting rightful claims ex post, or may contract around that risk ex ante, either by eliminating liability altogether or substantially reducing it.

Number of Pages in PDF File: 33

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Date posted: April 29, 2005  

Suggested Citation

Johnson, Lyman, Corporate Officers and the Business Judgment Rule. Business Lawyer, Vol. 60, February 2005. Available at SSRN: http://ssrn.com/abstract=711122

Contact Information

Lyman P. Q. Johnson (Contact Author)
Washington and Lee University - School of Law ( email )
Lexington, VA 24450
United States
540-458-8515 (Phone)
540-458-8488 (Fax)
University of St. Thomas, St. Paul/Minneapolis, MN - School of Law
MSL 400, 1000 La Salle Avenue
Minneapolis, MN Minnesota 55403-2005
United States

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