The Business Judgment Rule and Sphere Sovereignty
42 Pages Posted: 1 Feb 2011
Date Written: January 31, 2011
The Business Judgment Rule prevents courts from reviewing the substantive business decisions of corporate directors. The rule is a microcosm of the tension between government regulation and private autonomy that runs throughout corporate law. The Business Judgment Rule is protective of the self-determination of the business enterprise, but its rationale is, not surprisingly, debated. Courts and commentators have offered a variety of explanations, but these still leave the rule open to the accusation that it is a sui generis privilege granted to corporations.
This Article places the Business Judgment Rule in the context of a large-scale social theory: sphere sovereignty. In a sphere-sovereignty framework, the Business Judgment Rule should not be viewed as a special privilege of corporations. Rather, it should be viewed as a recognition by the courts of the autonomy of each societal sphere, created by God to pursue unique ends and purposes. The political and theological theory of sphere sovereignty provides a basis for the Business Judgment Rule’s various provisions and offers suggestions for its future development.
Keywords: Corporate law, Business Judgment Rule, Sphere Sovereignty, Autonomy, Kuyper, Dooyeweerd, business enterprise, institutional pluralism
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