Monday, June 03, 2013

Justice Goldberg Captured Essence of Business Judgment Rule in Tender Offer Advisory Committee Dissent

In a dissent  to the report of the SEC's Tender Offer Advisory Committee in 1983, former Supreme Court Justice Goldberg had some timely observations on the business judgment rule. Justice Goldberg said that assertions that golden parachutes are justified by the business judgment rule are without foundation because they are based upon a misconception of the rule. The business judgment rule was designed to safeguard not the personal interests of managers, he noted, but rather the good faith judgment of managers as to what is in the best interests of the corporation. Managerial judgment must and should not be affected or tainted by a conflict of interest. Simply put, the business judgment rule is fashioned to permit latitude to managers of corporations in the ordinary good faith conduct of business affairs in the interest of the corporation, where there is no self-dealing or other conflict of interest involved.