Balancing the Scales: A Statutory Business Judgment Rule for Hong Kong?

Abstract

The collapse of Enron and WorldCom has focused considerable attention upon the company director as a 'gatekeeper' for good corporate governance. They are presently subject to ever increasing scrutiny and much of the recent reforms around the world have adopted a regulatory philosophy premised on keeping company directors on the 'straight and narrow' by compelling them to 'Do X', 'Do Y' or 'Do Z'. This approach presumes that legislators and regulators have the inherent ability to subject business decisions to systematic analysis and fails to recognize that such decisions often involve intangible and intuitive insights. This article seeks to balance the scales in favor of directors by offering them safe harbor through the enactment of a statutory business judgment rule for decisions that are made without any conflicts of interest and with full knowledge and appreciation of the material facts. In doing so, it will allow directors to get back to the basics of business within a capitalist framework namely, to promote entrepreneurism through the facilitation of legitimate business decisions and risk taking.