1 Schnell, J “A procedural treatment of derivative suit dismissals by minority directors” (1981) 69/3 California Law Review 885 at 885Google Scholar. See also Triem, F “Judicial schizophrenia in corporate law: Confusing the standard of care with the business judgment rule” (2007) 24 Alaska Law Review 23 at 26Google Scholar, noting that “the essence of the business judgment rule is deference to directors’ decision making based on judicial unwillingness to re-examine a business decision and judicial reluctance to discourage directors from risk-taking”.

2 M Rich “The business judgment rule: Partial armor for directors and officers” (2014) New Jersey Lawyer 55 at 55.

3 Ubelaker, M “Director liability under the business judgment rule: Fact or fiction” (1981) 35 Southwestern Law Journal 775 at 777Google Scholar.

4 Pepples, R “Use and misuse of the business judgment rule in close corporations” (1985) 60/3 Notre Dame Law Review 456 at 456Google Scholar, stating “the business judgment rule occupies a venerable position among corporate law principles. The rule is uniformly noted in major law school casebooks and hornbooks and is cited frequently by the court. The business judgment rule invariably appears in any distillation of general corporate law.”

5 J Leach “The correct understanding of the business judgment rule in section 76(4) of the Companies Act 71 of 2008: Avoiding the American mistakes” (LLM thesis submitted to the Faculty of Law, University of Cape Town, 2014) at 38, available at: <http://open.uct.ac.za/bitstream/handle/11427/9615/thesis_law_2014_leach_j.pdf;sequence=1> (last accessed 7 June 2020), stating that “the business judgment rule is the mechanism by which the inherent tension between accountability and authority is resolved”.

6 For the literature on this, see Berle, A and Means, G The Modern Corporation and Private Property (1932, The Macmillan Company)Google Scholar.

7 See de la Rosa, G and Shopovski, J “Directors’ conflict of interest: Different European legal perspectives” (2013) 4/4 Beijing Law Review 174 at 174Google Scholar.

8 “Agency problem” implies that an agent does not always act in the principal's interest. For this definition and the costs associated with agency problems, see Jensen, M and Meckling, W “Theory of the firm: Managerial behaviour, agency cost and ownership structure” (1976) 3 Journal of Financial Economics 305CrossRefGoogle Scholar. For other literature, see Oyarzin, C “Institutional shareholders and corporate governance: Do institutional shareholders have an active participation in preventive governance in the United Kingdom? And if so, how?” (2011) 38/1 Revista Chilena De Directio 9 at 10Google Scholar, stating “this theory perceives the governance relationship as a contract between shareholders (the principal) and directors (the agent), and this agency theory utters a fundamental problem in organizations-self-interested behavior. A corporation's manager could have personal goals that compete with the owner's goal of maximization of shareholder wealth. When shareholders authorize managers to administer the firm's assets, a potential conflict of interests exists between the two groups”. See also Ishak, S, Che Omar, A and Ahmad, A “Directors’ fiduciary duties to perform in the best interest of the companies: An inter-related relationship between ethics and governance” (2011) 3/1 International Business & Management 111 at 113Google Scholar, stating that “agency theory has assumed that management as the opportunist agents [sic] and thus requires monitoring from various types of monitoring tools”. For agency costs, see Brudney, V “Corporate governance, agency costs, and the rhetoric of contract” (1985) 85 Columbia Law Review 1403 at 1406–07CrossRefGoogle Scholar.

9 Branson, D “The rule that isn't a rule: The business judgment rule” (2002) 36 Valparaiso University Law Review 631 at 632Google Scholar, noting that “the business judgment rule is multifaceted”.

10 K Davis “Once more, the business judgment rule” (2000) Wisconsin Law Review 573 at 573.

11 Grossman, N “Director compliance with elusive fiduciary duties in a climate of corporate governance reform” (2007) 12/3 Fordham Journal of Corporate & Financial Law 393 at 402Google Scholar.

12 473 A 2d 805 (Del 1984) at 812.

13 H Manne “Our two corporation systems: Law and economics” (1967) 53 Virginia Law Review 259 at 270, cited in Johnson, L “Corporate officers and the business judgment rule” (2005) 60 Business Lawyer 439 at 454Google Scholar.

14 A Brumbaugh “The business judgment rule and the diversified investor: Encouraging risk in financial institutions” (2017) UC Davis Business Law Journal 171 at 175.

15 (1829) 8 Mart (NS) 68 (La 1829).

16 Id at 77–78, cited in I Smith “The application of the business judgment rule in fundamental transactions and insolvent trading in South Africa: Foreign precedents and local choices” (LLM mini-thesis submitted to the Faculty of Law, University of Western Cape, 2016) at 1, available at: <https://etd.uwc.ac.za/bitstream/handle/11394/5523/Smit_i_llm_law_2017.pdf?…1…> ( last accessed 7 June 2020).

17 Arsht, S “The business judgment rule revisited” (1979) 8/1 Hofstra Law Review 93 at 97Google Scholar.

18 Brumbaugh “The business judgment rule”, above at note 14 at 182.

19 See Figge v Bergenthal 130 Wis 594 (1905) at 615 and 624–25; and Theis v Durr 125 Wis 651 (1905) at 659.

20 McEachin, T “Theriot v Bourg: The demise of the business judgment rule in Louisiana?” (1998) 59 Louisiana Law Review 375 at 389Google Scholar, noting that “almost every other jurisdiction in the country recognizes the business judgment rule”.

21 See Principles of Corporate Governance: Analysis and Recommendations (1994, American Law Institute) (fondly known as the “ALI Corporate Governance Project”), para 4.01(c), available at: <https://www.ali.org/publications/show/corporate-governance-analysis-and-recommendations/> (last accessed 7 June 2020).

22 Australia, Germany, Malaysia and South Africa and have codified the rule. See Branson, D “A business judgment rule for incorporating jurisdictions in Asia” (2011) 23 Singapore Academy of Law Journal 687 at 688Google Scholar.

23 Gurrea-Martinez, A “Re-examining the law and economics of the business judgment rule: Notes for its implementation in non-US jurisdictions” (2018) 18/2 Journal of Corporate Law Studies 417 at 417CrossRefGoogle Scholar.

24 Rosenberg, D “Supplying the adverb: The future of corporate risk-taking and the business judgment rule” (2009) 6/2 Berkeley Business Law Journal 216 at 217Google Scholar.

25 McEachin “Theriot v Bourg”, above at note 20 at 384. See also McMillan, L “The business judgment rule as an immunity doctrine” 4/2 William & Mary Business Law Review (2013) 521 at 528Google Scholar, stating that “in order to maximize shareholder wealth and grow a corporate enterprise, directors must often make business decisions that entail an assumption of risk; very seldom does return exist without risk, and there is generally presumed to be a positive correlation between the two”.

26 McEachin, id at 384 and 389.

27 Deutsch, J “Part II: The business judgment rule under Connecticut corporation law and commentary in Joy v North” (1982) 56 Connecticut Business Journal 451 at 461Google Scholar.

28 See Joy v North 692 F 2d 880 (1982) at 885–86, where the court noted, “shareholders can reduce the volatility of risk by diversifying their holdings. In the case of diversified shareholder [sic], the seemingly more risky alternatives may well be the best choice since great losses in some stocks will over time be offset by even greater gains in others … A rule which penalizes the choice of seemingly riskier alternatives thus may not be in the interest of shareholders generally.”

29 Brumbaugh “The business judgment rule”, above at note 14 at 178.

30 Rosenberg “Supplying the adverb”, above at note 24 at 223.

31 This is fondly called the “hindsight bias” and “describes the human tendency to conclude from the occurred damage to a breach of duty during the decision procedure or with regard to the concrete decision result. The possibility of averting the occurred damage is over-estimated, because possibilities of averting the occurred damage seem more likely from a retrospective view. Thus, the occurred damage would be seen as a direct consequence of the decision and the breach of duty would lie within the non-preventing of the damage”: S Eisele “Codification of the business judgment rule in section 76(4) Companies Act 2008: Comparing the South African with the German approach” (LLM thesis submitted to the University of Cape Town, 2017) at 30, available at: <https://open.uct.ac.za/bitstream/handle/11427/25021/thesis_law_2017_eisele_stefan.pdf?sequence=1> ( last accessed 7 June 2020).

32 Lee, A “Business judgment rule: Should South African corporate law follow the King's Report's recommendation” (2015) 1 University of Botswana Law Journal 50 at 77Google Scholar. It has been noted that “the judiciary is institutionally not in the correct position to judge with the power of hindsight a decision which, at the time of making the decision, was ex ante correct or reasonable; but which ex post facto was not”: Leach “The correct understanding”, above at note 5 at 31.

33 Gurrea-Martinez “Re-examining the law”, above at note 23 at 423.

34 K McCarthy “Corporate officer liability and the applicable standard of review under Delaware law and agency law” (paper submitted in partial fulfilment of the requirements of the King Scholar Program, Michigan State University College of Law, 2017) at 17, available at: <https://digitalcommons.law.msu.edu/cgi/viewcontent.cgi?article=1274&context=king> (last accessed 7 June 2020).

35 For justification of the rule on grounds of judicial economy, see Karasik v Pacific E Corporation 21 Del Ch 81 at 97 (Ch 1935).

36 In MMS Cos Liquid Audio Inc 813 A 2d 1118 (Del 2003), the court noted (at 1127) that “the business judgment rule, as a standard of judicial review, is a common law recognition of the statutory authority to manage a corporation that is vested in the board of directors”.

37 Johnson, L “Unsettledness Delaware corporate law: Business judgment rule, corporate purpose” (2013) 28 Delaware Journal of Corporate Law 405 at 412Google Scholar, noting that “Delaware courts frequently ground the rule in that section of the corporate statute providing that the business affairs of the corporation are to be managed by or under the discretion of the board”. See also, Swanson, C “Juggling shareholder rights and strike suit in derivative litigation: The ALI drops the ball” (1993) 77 Minnesota Law Review 1339 at 1360Google Scholar, stating “the rule also gives directors the broad discretion to formulate company policy without the fear of judicial second-guessing”; and Curtin, D “Demand of directors in a shareholder derivative suit when the board has approved the wrong” (1985) 26/2 Boston College Law Review 441 at 444Google Scholar, noting that, “the protection of the doctrine rests upon the assumption that the directors must be given wide latitude in making decisions to manage the corporation properly and efficiently. Accordingly, when a director makes a decision in the course of his corporate duties that he believes erroneously but in good faith, to be in the best interests of the corporation, a court will not substitute its judgment for the judgment of the director or hold the director liable for any loss resulting from the honest mistake”.

38 Waller, P “The directors’ business judgment rule: The final act” (1988) 22 Suffolk University Law Review 649 at 650Google Scholar, arguing that the business judgment rule is geared towards “encouraging talented individuals to assume the post of corporate director”.

39 McEachin “Theriot v Bourg”, above at note 20 at 384.

40 Ponta, A and Catana, R “The business judgment rule and its reception in European countries” (2015) 4/7 The Macrotheme Review 125 at 132Google Scholar.

41 Aman, T “Cost-benefit analysis of the business judgment rule: A critique in the light of the financial meltdown” (2010) 74 Albany Law Review 1 at 7Google Scholar.

42 Johnson “Unsettledness Delaware corporate law”, above at note 37 at 424, arguing that “the business judgment rule is a doctrinal vessel of judicial review into which the fiduciary duties of care and loyalty are fitted and subsumed”. See also Eisele “Codification of the business judgment rule”, above at note 31 at 1.

43 Ubelaker “Director liability”, above at note 3 at 784.

44 Above at note 21.

45 Id, para 4.01(c).

46 Greenhow, A “The statutory business judgment rule: Putting the wind into directors’ sails” (1999) 11 Bond Law Review 33 at 55Google Scholar.

47 Nevada Revised Statutes (2001), sec 78.138(3).

48 California Corporation Code (2012), sec 309. For other states that have adopted the business judgment rule, see: Alaska Corporation Code (2018), sec 10.06.450(b); Arkansas Code (2015), sec 4-36-302; Connecticut General Statutes (2012), sec 33-356; Florida Statutes (2010), secs 607.0830 and 607.0831; Georgia Code (2017), sec 14-2-830; Indiana Code (1989), sec 23-1-35-1; Louisiana Revised Statutes (2012), sec 12.92(E); Maine Business Corporation Act (2001) 13, sec 831; Maryland Corporations and Associations Code (annotated 2004), sec 2-405.2; Michigan Company Laws (2014), sec 450.1541(a); Minnesota Statutes (2016), sec 317 A.215; Missouri Revised Statutes (2011), sec 351-345; Montana Code (annotated 2017), sec 35-416; Nevada Revised Statute (2019), sec 78.138; New Hampshire Revised Statute (2013), sec 293-A:8.30 (e) and (f); New Jersey Revised Statutes (2013), secs 14A and 6-14(2); New Mexico Statute (2006), sec 53-4-18.1; New York Business Corporation Law (2014), sec 717; North Carolina General Statute (2014), sec 55.8-30; Oklahoma Statutes (2014), sec 18-867; Pennsylvania Consolidated Statute (2014), sec 513; Rhode Island General Laws (2014), sec 7-1.2-811; South Carolina Code of Laws (2013), sec 33-8-30; Tennessee Code (2010), sec 48-18-304; Texas Business Corporation Act (2005), art 2.41; Utah Code (2006), sec 16-10a-840; Vermont Statutes (2012), sec 11A VSA S.8.30; Wisconsin Statutes & Annotations (2015), sec 180.0828; and Wyoming Statutes (2011), sec 17-16-830.

49 For instance, in Resolution Trust Co v Norris 830 F Supp 351 (SD Texas, 1993), the court noted (at 356) that “Texas courts to this day will not impose liability upon a non-interested corporate director unless the challenged transaction is ultra vires or tainted by fraud … Such is the business judgment rule in Texas”.

50 507 F 2d 759 (3rd Cir 1974) at 762.

51 698 A 2d 959 (Del Ch 1996).

52 Id at 967.

53 Aronson v Lewis, above at note 12 at 812.

54 629 F 2d 287 (3rd Cir 1980) at 292.

55 D Branson “A business judgment rule”, above at note 22 at 692. See also Legg, M and Jordan, D “The Australian business judgment rule after ASIC v Rich: Balancing director authority and accountability” (2014) 34 Adelaide Law Review 403 at 414Google Scholar, noting that “the party alleging liability may rebut the presumption by showing … : (a) That the directors violated any of their fiduciary duties; or (b) That the business judgment rule is inapplicable because the directors committed an act of fraud, illegality or otherwise. If the party alleging liability rebuts the presumption, the director must prove that the challenged transaction was entirely fair to the corporation and its shareholders.”

56 In Krasner v Moffet 826 A 2d 777 (Del 2003), the court opined (at 287) that “when the presumption of the business judgment rule has been rebutted, the entire fairness rule is implicated and the defendants bear the burden of proof”.

57 Branson “The rule that isn't a rule”, above at note 9 at 636.

58 Ibid.

59 See Smith “The application”, above at note 16 at 24.

60 ALI Corporate Governance Project, above at note 21, para 4.01(c)(ii).

61 Id, para 4.01(c)(iii).

62 For a comprehensive analysis of the abstention doctrine, see Bainbridge, SM “The business judgment rule as abstention doctrine” (2004) 57 Vanderbilt Law Review 83Google Scholar.

63 For the literature on immunity doctrine, see McMillan “The business judgment rule”, above at note 25.

64 Sharfman, B “The importance of the business judgment rule” (2014) 14 New York University Journal of Law & Business 27 at 28–29Google Scholar, stating that the rule “is the most important standard of judicial review under corporate law”.

65 Ponta and Catana “The business judgment rule”, above at note 40 at 126.

66 237 NE 2d 776 (111 App Ct 1978) at 779.

67 383 NYS 2 d 807 (Sup Ct 1976) at 810–11.

68 Scarlett, A “A better approach for balancing authority and accountability in shareholder derivative litigation” (2008) 57 University of Kansas Law Review 39 at 71Google Scholar.

69 J Leach “The correct understanding”, above at note 5 at 44, stating that “the business judgment rule is the mechanism by which the inherent tension between accountability and authority is resolved”.

70 Branson “A business judgment rule”, above at note 22 at 687.

71 Ponta and Catana “The business judgment rule”, above at note 40 at 127.

72 Id at 126, noting that, under the standard of review, “courts take an objective examination of the merits of the board decisions”. The scholars also note (id at 131) that the immunity rule “operates pretty similar to the standard of review approach since the effect is the same: insulation of directors from liability for business-related decisions. The functional analysis, which is to be made prior to granting immunity, is the same, but the procedural analysis focuses though on disqualifiers that can indemnify violations of the duty of loyalty, such as fraud, self-dealing, inappropriate information or lack of any decision”.

73 47 NY 2d, 619 (1979).

74 Id at 624.

75 Ibid.

76 Id at 625–26.

77 Id at 631.

78 603 F 2d 724 (8th Cir 1979).

79 Id at 727.

80 Id at 730–31.

81 733 NE 2d 973 (Ind Ct App 2000).

82 Id at 981–82.

83 Indiana Code (1989), sec 23-1-32-4.

84 430 A 2d 779 (Del 1981).

85 For this, see also Qualls, K “Zapata Corp v Maldonado: Delaware's judicial business judgment rule: A ship without a rudder” (1982) 19 California Western Law Review 189 at 204Google Scholar, citing Zapata, above at note 84 at 788.

86 Ibid.

87 Id, at 205, citing Zapata, above at note 84 at 788.

88 Ibid.

89 Id at 209.

90 See SEC v Texas Gulf Sulfur Co 410 F 2d 833 (2nd Cir 1968).

91 Id at 850, footnote 12.

92 See Gimbel v Signal Cos 316 A 2d 599 (Del Ch 1974) at 615, suggesting that the rule would not apply to “actions which are without bounds of reason”.

93 Above at note 12 at 812. Also, in the case of Allaun v Consol Oil Co 147 A 2d 345 (Del 1929), the court noted (at 360) that the business judgment rule will not apply in cases of “reckless indifference or a deliberate disregard of the interests of the whole body of stockholders”. See also Warshaw v Calhoun 221 A 2d 487 (Del 1966) at 492–93.

94 812 F Supp 1256 (DDC 1993).

95 Id at 1267–68. For other cases on gross negligence, see Holland v American Founders Life Insurance Co 376 P 2d 162 (Colo 1962); Pool v Pool 16 So 2d 132 (La App 1943); Devereux v Berger 284 A 2d 605 (Md 1971); Bordelon v Cochrane 533 So 2d 82 (La App 1988); Uccello v Gold'N Foods Inc 90 NE 2d 530 (Mass 1950); Deal v Johnson 862 S 2d 214 (Ala 1978); and Louisiana World Exposition v Federal Insurance Co 864 F 2d 1147 (5th Cir 1989).

96 It has been noted that “the application of the business judgment rule is an examination of the decision-making process, not of the decision itself”: McEachin “Theriot v Bourg”, above at note 20 at 383. See also Gevurtz, F “The business judgment rule: Meaningless verbiage or misguided notion?” (1994) 67 Southern California Law Review 287 at 302Google Scholar, noting that: “there are a number of variations on this process-versus-substance theme. All have in common, however, the notion that the business judgment rule calls for less judicial scrutiny for the merits of the directors’ decision than of the process the directors used in arriving at the determination. One obvious extreme is to conclude that the business judgment rule precludes any review at all of the substance of the decision”.

97 488 A 2d 858 (Del Sup Ct 1985).

98 Id at 873.

99 D Rosenberg “Galactic stupidity and the business judgment rule” (2007) Journal of Corporate Law 301 at 322.

100 Olawepo v Securities and Exchange Commission (2011) 16 NWLR (pt 1272) 122 at 129.

101 Companies and Allied Matters Act cap C20 Laws of the Federation of Nigeria, 2004 (CAMA), sec 282(1).

102 Id, sec 282(2).

103 H Adamu “An examination of the director's duty of care and skill under company laws of Nigeria and the United Kingdom” at 9, available at: <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2909167> (last accessed 7 June 2020).

104 This is known as the rule in Foss v Harbottle (1843) 2 KB 461. This rule is codified under CAMA, sec 299. This section provides that “subject to the provisions of this Act, where irregularity has been committed in the course of a company's affairs or any wrong has been done to the company, only the company can sue to remedy that wrong and only the company can rectify the irregular conduct”.

105 The instances are stated in id, sec 300(a)–(f). They are: (a) where the company enters into an illegal or ultra vires transaction; (b) where the company is purporting to do by ordinary resolution an act that under its constitution or CAMA is required to be done by special resolution; (c) where any act or omission affects the shareholder's individual right as a member; (d) where there is fraud committed against the company or the minority shareholders and the directors fail to take appropriate action to redress the wrong; (e) where a company meeting cannot be called in time to be of practical use in redressing a wrong done to the company or to the minority shareholders; and (f) where the directors are likely to derive a profit or benefit, or have profited or benefitted from their negligence or breach of duty.

106 Id, sec 303(2)(c).

107 Qualls “Zapata Corp”, above at note 85 at 196.

108 Gevurtz “The business judgment rule”, above at note 96 at 329.

109 Id at 329–30, footnote 203, quoting Zapata, above at note 84 at 789. It has been noted that: “the inherent bias [in the SLC approach] can come from many sources. Foremost is the tainted majority's control over the Committee's selection process. The majority is likely to seek individuals who are prominent figures in the business world or board members of their or other corporations. These individuals usually entertain sympathetic views towards the problems of directors and look unfavourably on shareholder intrusion into the province of the management. Entrusting control of a lawsuit to a committee selected, funded and authorized by defendant directors presents an inescapable potential for abuse. The problem is further complicated when the committee is comprised of the corporation's own directors. Not only do structural and financial ties exist between committee members and management, but unavoidable psychological and social attachments affect their neutrality. An individual asked to consider the actions of a colleague cannot be expected to be neutral. The individual may be risking his salary, future benefits, status, and ultimately, his job if he fails to conform to the corporation's wishes”: Qualls “Zapata Corp”, above at note 85 at 203.

110 CAMA, sec 303(1).

111 Id, sec 303(2)(a).

112 Id, sec 303(2)(c).

113 Id, sec 303(2)(d).

114 For instance, it has been observed that the remedies available to shareholders in derivative suits are mere “illusory protection”: Nwafor, A “Shareholder derivative action: Nigerian statutory innovation: Not yet a victory for the minority shareholder” (2010) 7 Macquarie Journal of Business Law 214 at 214Google Scholar. With respect to the US, a scholar noted that “recent applications of the business judgment rule to derivative actions indicate that shareholders face an almost insurmountable barrier to establishing the liability of directors under allegations not only of negligence but also of illegal activities”: Ubelaker “Director liability”, above at note 3 at 802.

115 Qualls “Zapata Corp”, above at note 85 at 193 and 196.

116 CAMA, sec 282(1).

117 Davis “Once more”, above at note 10 at 575–76.

118 Id at 576.

119 Aman “Cost-benefit analysis”, above at note 41 at 6.

120 Johnson, E and Osborne, R “The role of the business judgment rule in a litigation society” (1980) 15/1 Valparaiso University Law Review 49 at 54Google Scholar.

121 See Brehm v Eisner 746 A 2d 244 (Del 2000) at 259. See also Warshaw v Calhoun, above at note 93 at 492–93 where the court noted that the rule would apply if it were established that the directors grossly abused their discretion.

122 Johnson “Unsettledness Delaware corporate law”, above at note 37 at 428, noting that “but the duty of care is not merely a duty to avoid negligence, because such phrasing lacks a reference point: Don't be grossly negligent to what?”

123 Gevurtz “The business judgment rule”, above at note 96 at 304.

124 Harris, J and Hargovan, A “Still a sleepy hollow? Directors’ liability and the business judgment rule” (2017) 31 Australian Journal of Corporate Law 1 at 9Google Scholar. With respect to a similar claim in South Africa, see Kanamugire, J Chrysostome “The directors’ duty to exercise care and skill in contemporary South African company law and the business judgment rule” (2014) 5/20 Mediterranean Journal of Social Sciences (2014) 70 at 76Google Scholar, noting that “the effect of the United States styled business judgment rule is that it will neutralize the objective standard imposed by the partially codified duty of directors to exercise, care, skill and diligence”.

125 Only one case has dealt with the issue of duty of care in recent times. In Securities Solutions Ltd and Others v Mrs Biodun Idowu Adamu-Oladiran and Others (2016) LPELR-40068 (CA) at 32, the court held that two directors who did not know about the illegal sale of shares by another director failed to exercise the degree of care required under the law. The court held so, notwithstanding the directors’ argument that they were not executive directors of the company who were involved in the day to day management of the company's business.

126 Gurrea-Martinez “Re-examining the law”, above at note 23 at 431.

127 Leach “The correct understanding”, above at note 5 at 53, noting the same problem for South Africa's adoption of the US business judgment rule. It is pertinent to note that it is not argued that US corporate law and culture do not respect the shareholder primacy model. It is the opinion of the writer that corporate law and culture in the US consider the interests of directors in corporate governance. For example, a tradition of executive compensation schemes attests to this fact. For scholarly works on executive compensation in the US, see Loewenstein, M “The conundrum of executive compensation” (2000) 35 Wake Forest Law Review 1Google Scholar; R Posner “Are American CEOs overpaid, and, if so, what if anything should be done about it?” 58 Duke Law Journal (2009) 1013; R Thomas and K Martin “Litigating challenges to executive pay: An exercise in futility” (2001) Washington University Law Quarterly (2001) 569; and Kaplan, S “CEO pay and corporate governance in the US: Perceptions, facts, and challenges” (2013) 25/2 Journal of Applied Corporate Finance 8CrossRefGoogle Scholar.

128 Leach “The correct understanding”, above at note 5 at 38.

129 Bainbridge, S “Director primacy and shareholder disempowerment” (2006) 119 Harvard Law Review 1735 at 1745Google Scholar. See also Bainbridge, S “Director primacy: The means and ends of corporate governance” (2003) 97 Northwestern University Law Review 547 at 569–72Google Scholar.

130 Duesenberg, R “The business judgment rule and shareholders derivative suit: A view from inside” (1982) 60/2 Washington University Law Review 311 at 311Google Scholar.

131 Meese, A “The team production theory of corporation law: A critical assessment” (2002) 43 William & Mary Law Review 1629 at 1631Google Scholar. See also, Ho, J “Economic theories of the firm versus stakeholder theory: Is there a governance dilemma” (2008) 38 Hong Kong Law Journal 399 at 399Google Scholar.

132 Millon, D “New directions in corporate law: Communitarians, contractarians, and the crisis in corporate law” (1993) 50/4 Washington and Lee Law Review 1373 at 1373–74Google Scholar.

133 H Lestari “Director duty to employees: Co-relation between corporate and labour laws” Mimbar Hukum Edisi Khusus (November 2011) 59 at 62, available at: <https://www.researchgate.net/publication/265571847_dIrector%27s_duty_to_eMPloyees_co-relatIoN_BetweeN_corPorate_aNd_laBour_laws> (last accessed 7 June 2020). See also Lacobucci, E “Corporate fiduciary duties and prudential regulations of financial institutions” (2015) 16/1 Theoretical Inquiries of Law 183 at 186Google Scholar, opining that “directors and officers were … understood to owe fiduciary duties to the company, which was understood further to require them to act in the interests of shareholders”.

134 Slawotsky, J and Truby, J “The director duty of care in Qatar” (2016) 26 Duke Journal of Comparative & International Law (2016) 337 at 354Google Scholar.

135 (1979) NSCC 211 at 263.

136 (1998) 4 NWLR (pt 546) 357 at 364.

137 See Schartz, S “Misalignment: Corporate risk-taking and public duty” (2016) 92 Notre Dame Law Review 1 at 3Google Scholar, opining that “there is widespread agreement that excessive corporate risk-taking was one of the primary causes of the systemic economic collapse that became the 2008–2009 global financial crisis”.

138 Kaal, W and Painter, R “Initial reflections on an evolving standard: Constraints on risk taking by directors and officers in Germany and the United States” (2010) 40 Seton Hall Law Review 1433 at 1452Google Scholar, noting that “the business culture in the United States has traditionally been associated with a more entrepreneurial spirit, which is linked with an increased willingness to take risks in order to attain a higher return”. See also, Bratton, W “Enron and the dark side of shareholder value” (2002) 76 Tulane Law Review (2002) 1275 at 1283Google Scholar.

139 See Banks, E Risk Culture: A Practical Guide to Building and Strengthening the Fabrics of Risk Management (2012, Palgrave Macmillan) at 162–63CrossRefGoogle Scholar. See also, V Acharya et al “Guaranteed to fail: Fannie Mae, Freddie Mac and the debacle of mortgage finance” at 44, available at: <https://files.stlouisfed.org/files/htdocs/conferences/gse/White.pdf> (last accessed 7 June 2020), arguing that these financial institutions were clearly major participants in high risk mortgage lending”; and Rosenberg “Supplying the adverb”, above at note 24 at 217.

140 Aman “Cost-benefit analysis”, above at note 41 at 1.

141 Lombard, S “Importation of a statutory business judgment rule into South African company law: Yes or no?” (2005) 68 Journal of Contemporary Roman Dutch Law 614 at 623Google Scholar.

142 Johnson “Unsettledness Delaware corporate law”, above at note 37 at 424–25.

143 Lombard “Importation”, above at note 141 at 623–24.

144 Wen, C “Assessing the applicability of the business judgment rule and the defensive business judgment rule in the Chinese judiciary: A perspective on takeover dispute adjudication” (2010) 34/1 Fordham International Law Journal 124 at 128Google Scholar.

145 See O Hart “An economist's view of fiduciary duty” (1993) University of Toronto Law Journal 299 at 299–300.

146 For the literature on the risks of transplantation, see Brietzke, P “The politics of legal reform” (2004) 3 Washington University Global Studies Law Review 1 at 31 and 32Google Scholar. See also Rodrik, D “Institutions for high quality growth: What they are and how to acquire them” (2000) 35 Studies in Comparative International Development 3 at 3CrossRefGoogle Scholar.

147 Gevurtz “The business judgment rule”, above at note 96 at 336–37.