#36 · 2026-09-11 · Legal term
Business judgment rule
The business judgment rule generally protects qualifying board decisions from hindsight review merely because they turned out badly. The informed process, disinterest, and good faith support the presumption here.
Rule to remember
The business judgment rule is a presumption favoring informed, disinterested corporate decisions made in good faith for the corporation's benefit.
Key elements and checks
- An informed decision-making process.
- Disinterest and independence.
- Good faith and a corporate purpose.
In the source’s words
“a presumption in favor of the board”
Cornell Wex — Business judgment rule
Standards and rebuttal rules vary by state. A bad outcome alone does not establish a fiduciary breach.