Excerpts from: American Business Law, A Civil Law Perspective. American Business Law presents key aspects of the American common law in a clear and concise manner for lawyers and law students from civil law countries.

Directors and officers have a fiduciary relationship with the corporation, resulting in a duty of care to avoid harm to the corporation, a duty of loyalty by placing the corporation’s interests ahead of their own as well as a duty of good faith and in some states a duty of candor. In accordance to the duty of care, corporate officers have a duty to inform themselves, prior to making a business decision, of all material information reasonably available to them. They then are to act with requisite care in the discharge of their duties. This duty of care is judged under a gross negligence standard.1 Courts have defined gross negligence as “reckless indifference to or a deliberate disregard of the whole body of stockholders” or actions that are “without the bounds of reason.”2 The courts look at whether the directors have acted with reasonable diligence and in good faith and whether any conflict of interest was involved. The business judgment rule insulates an officer or director from liability for a business decision. The decision must be made in good faith, she must be informed to the extent she reasonably believes appropriate under circumstances, and rationally believe that the decision is in the best interests of a corporation.3 [read more]