ANALYSIS: Can the Business Judgment Rule Serve Multiple Masters?

How flexible is the business judgment rule? The Business Roundtable recently issued a new standard (Statement) by which corporations commit to operate in service to a broad range of stakeholders, including customers, employees, suppliers, and communities. This announcement raises legal questions for corporate directors: May they now make decisions that put shareholders in second place, behind other stakeholders? If they do so, will the business judgment rule protect them? To which stakeholders do directors owe their fiduciary duty?

Since Delaware is home to most major U.S. corporations, it’s a good framework to help with these queries.

Impact on the ...