Which of the following is the effect of the business judgment rule regarding the liability of officers and directors?
A) Courts will not substitute their judgment for that of the board or an officer acting in good faith with due care.
B) Officers and directors will never have liability for their decisions relating to the corporation.
C) Officers and directors may have liability for bad faith decisions,but cannot be liable for failure to act.
D) Directors and officers will not be held liable for conduct that is only negligent.

Question

Quizplus · Accepted Answer

The business judgment rule provides that as long as the directors or officers acted in good faith with due care, the court will not second-guess their decisions. This does not mean that officers and directors will never have liability, but it does limit their liability for decisions that turn out to be unwise in hindsight. Additionally, officers and directors can still be held liable for bad faith decisions or breach of duties of loyalty or care. Furthermore, the business judgment rule applies to both acts and omissions, so directors and officers may be liable for failure to act if they had a duty to do so. Finally, the business judgment rule does not protect directors and officers from liability for gross negligence or intentional misconduct, only conduct that is merely negligent.  So, option A is correct.

Which of the Following Is the Effect of the Business