Protecting the Authority of Directors: An Empirical Analysis of the Statutory Business Judgment Rule

Abstract

This article analyses whether the Australian statutory Business Judgment Rule (BJR) has adequately fulfilled the expectation of the legislature,¹ namely, to protect the authority of directors in the exercise of their duties but not to insulate them from liability; to encourage directors to take advantage of opportunities involving responsible risk taking; to confirm the common law position that Courts will rarely review bona fide business decisions; to provide a clear presumption in favour of a director's judgment; and to provide legal certainty. This question is answered by reference to how the Australian Courts have applied the BJR. This article outlines the finding that the rule has not met the legislative aims, based on an examination of all of the cases which have considered the BJR since its enactment.