Which statement accurately describes the business judgment rule for corporate directors?

• A. Court will not second guess directors as long as they acted in good faith, with reasonably informed and rational basis.
• B. Directors must assume personal liability for any decision.
• C. The rule requires directors to refrain from any risk-taking.
• D. The rule overrides fiduciary duties in all circumstances.

Answer: (A)

The core idea is that directors are protected for the decisions they make in running the company, as long as they act in good faith, with due care, and based on reasonable information. When directors take the time to inform themselves and pursue a rational business purpose, the courts won’t second-guess their choices simply because the outcome wasn’t favorable.

That’s why the statement describing the business judgment rule as courts not second-guessing directors if they acted in good faith, with reasonably informed and rational basis, is the best fit. It captures the essence: shield for prudent, informed, non-conflicted decision‑making, even if the result later seems wrong.

It’s not about personal liability for every decision, nor about avoiding all risk. And it doesn’t erase fiduciary duties in all situations; those duties still apply and the rule can be overcome if a director acted with self-dealing, fraud, illegality, or a clear lack of good faith or due care.