The officers and the directors are fiduciaries of the corporation, but the business judgment rule may preclude liability on officers and directors for honest mistakes of judgment.

Question

Quizplus · Accepted Answer

Officers and directors are indeed fiduciaries of the corporation, meaning they have a duty to act in the best interest of the corporation and its shareholders. The business judgment rule protects them from liability for decisions made in good faith and with the belief that they are acting in the best interest of the corporation, even if those decisions turn out to be mistaken. This rule acknowledges that making business decisions often involves risk and that officers and directors should not be held liable for honest errors in judgment.

The Officers and the Directors Are Fiduciaries of the Corporation