Business Judgment Rule

Abstract Directors of corporations have fiduciary duties they must adhere to while leading a business. The two primary duties of a Director is the duty of care; the diligence and caution in the performance of their duties, and the duty of loyalty; take actions that are in the best interest of the company, not the personal interests of investments or family. Shareholders are the owners of the corporation and hold the director accountable for specific decisions. However, the Director needs consent from the shareholders to make certain decisions.

Areas and Principles of Law
The areas of law that will be reviewed are the business judgment rule and the duty of care. The directors are entitled to making
Also, there must be a majority buy in to the decision in order to move forward. This normally happens in the form of a vote amongst all shareholders. Analysis The business judgment rule states that the director will not be penalized by the courts if the decision was considered to be a careless or bad business decision (Bagley, 2012 page 657). However, if the courts rule that the director displayed negligence while making the decision, then the courts would rule in favor of the plaintiff (Bagley, 2012 page 657). Conclusion Roger used sound judgment in this case. He reached out to a consulting firm, data further supported his decision concerning sales trends, and they had a vote and the majority of the board voted in favor of creating the new division. The crude oil disruption was an unforeseen event that Roger wasn’t in control of. The sudden decrease in sport utility vehicle sales were caused by a shortage of crude oil, which in turn caused gas prices to increase drastically, which caused consumers to purchase fuel efficient