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Introduction

The theoretical objective of the business judgment rule and its practical implications underscore the delicate balance that needs to be maintained between the authority of directors to make corporate decisions and the need to hold directors accountable for such decisions. A choice of the appropriate balance appears to be elusive in contemporary concepts and application of the rule. Amidst the divergent judicial opinions and legal commentaries, this article distils the issues from the original formulation and application of the rule as currently contained in the concepts of the rule as a substantive standard of liability and as a standard of judicial review. This article makes recommendations that offer guidance for the formulation of standard rules to determine how directors’ error of judgment can be addressed under the business judgment rule.

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