Required reading

1. D: AktG, §§ 93, 116

2. UK: CA 2006, secs. 170, 172, 173–174

3. US: DGCL, §§ 143, 144; Model Act, §§ 8.30–8.31

Judging business judgment

Operation under central management is a core characteristic of the corporation. Management authority is delegated to a board of directors and other executive officers who control the aggregated assets of the corporation because it is expected that full-time, professional managers can operate the company more successfully than can the shareholders. In the course of managing the company, these expert directors make decisions to determine the course of the company's business operations. As discussed in Chapter 12, under the company laws of the UK, Germany and the US, directors must fulfill duties of care, skill and diligence, which, while not identical to those imposed on other fiduciaries like agents and trustees, are quite similar. Take, for example, the Companies Act 2006, which formulates the duty of care as follows:

In an ordinary negligence action under a standard of this type outside of the corporate context, a court could be expected to hear evidence from an expert witness as to whether the defendant in fact showed the “knowledge, skill and experience” required to meet the objective standard of care plus any special (subjective) skills held.