Question

Locate the U.S. Business Judgment Rule

Then locate the rule in any other country.


Discuss the following:


1.   What part or parts of the U.S. rule do you either agree or disagree?
2.   Compare/contrast the U.S. with your selected country. If they are the same, why do you think they are stated in similar ways. If different, discuss the differences.

If you could change the U.S. rule, what would you change and why?

If you would not change anything in the U.S. rule, discuss what aspects of the rule you believe are most effective and why?

You MUST provide citations for all materials used.

Answer 1

I comply with the principle of the law IF, after proof has been submitted and an investigation has been carried out, and it has been established by facts that the administrators, directors, managers and/or other members of a firm have taken a decision based on the interest of the shareholden and the company. Unless the evidence prove that they behaved in good conscience, they could not be found accountable because someone else would have made the same action in that place. Nonetheless, I also find that before the Business Judgement Rules apply, there must be a very thorough and comprehensive inquiry. The organization will also specifically define the responsibilities of its employees on the contracts with the officers – so before making the final case decision, the Americans BJR would consider the deal as part of the investigation. In fact, at least the principal duties required by the officers of the company will be reviewed or updated by the American BJR. The BJR states the general obligation of responsibility, vigilance and good faith to be practiced in countries such as China and Australia, which ensures that further legislation is needed to protect the rights of shareholders. Of example, the American BJR will go beyond stating that a manager of the Board who has relied on an impartial professional specialist should only remove a incompetent violation of duty, where (1) an independent advisor is consulted and is (2) presented with all the necessary facts in the case and (3) the leader of the Management Board is willing to survive a test on his plausibility. If right requirements are specified, U.S. BJR can be implemented more efficiently.

For the Business Decision Principle, the USA and Germany have exactly the same definition. The Business Judgment Rule in the US is known as "the legal rule which, if adequate evidence indicates that transactions have been made in good faith, makes companies officials, managing directors and other agents unresponsible from corporate responsibility for losses incurred in company transactments under their authority and powers to do so." It ensures that the boss will behave for the good of the entire company, not for his own personal interests. Prudence implies that the director will always act on fair conclusions and evidence and that he can not take any definitive step unless after appropriate inquiry which will show due diligence on behalf of the director. The concept also assures us that the courts should reject an appeal to be made by the owners, by the government or by others to judge the directors.

The same maxim is laid down in the German Company Decision Regule, and "it is a known underlying principle under German law that it takes a broader ability to be able to run the business effectively by the management board (and the supervisory board as well as they make management decisions). The courts ruled, short, that the member of the Board should only rely on the Law of Business Judgement if the member of the Board has done his best to explain the truth in order to make an educated judgment.

When I was studying for a variety of countries, I found that in countries like Australia, Brazil, Canada and China for example, the Market Decision Law followed the exact same principle. But China and Australia outlined general consideration, vigilance and good faith duties within the regulations, and included additional criteria which promote the interpretation of which decisions should and should not be made by the board members. I think comparisons with the BJR are triggered by the effects of globalisation, foreign trading and the need to enforce the same laws and guidelines for defending the interests of businesses working in countries.

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