The Business Judgment Rule

The Business Judgment Rule is a legal principle that protects company directors and officers from liability for decisions made in good faith, with reasonable care, and in the company's best interests. It recognizes that business leaders must make many decisions without certainty of outcomes. As long as they act honestly and thoughtfully, courts generally won’t second-guess their choices, even if the decisions turn out poorly. This rule encourages individuals to manage the company proactively without fear of unfair lawsuits over honest mistakes.