Business judgment rule

The business judgment rule protects companies from frivolous lawsuits by assuming that, unless proved otherwise, management is acting in the interests of the corporation and its stakeholders.
The rule assumes that managers will not make optimal decisions all the time.

The business judgment rule protects companies from frivolous lawsuits by assuming that, unless proved otherwise, management is acting in the interests of the corporation and its stakeholders. The rule assumes that managers will not make optimal decisions all the time.

The business judgment rule provides a director of a corporation immunity from liability when a plaintiff sues on grounds that the director violated the duty of care to the corporation so long as the director's actions fall within the parameters of the rule.