This session will provide a comprehensive understanding of the Business Judgment Rule (BJR) as it applies to corporate governance, with a specific focus on how directors and officers can navigate potential litigation. The session will start with a foundational overview of the BJR, followed by an in-depth analysis of the key legal cases that have shaped its application. Additionally, the session will delve into the strategies for advising corporate clients—particularly directors and officers—on how to avoid becoming targets of litigation, including the role of independent board directors in mitigating risk.
Session Structure and Key Topics:
1. Introduction to the Business Judgment Rule (BJR)
Objective: Provide a foundational understanding of the BJR and its role in corporate governance.
- Definition of the BJR and its purpose in protecting directors and officers from liability.
--- The BJR presumption: when courts defer to the decisions of corporate leaders.
--- Key elements required to invoke the BJR: good faith, rationality, and lack of conflicts of interest.
--- Key areas where the BJR applies: financial decisions, strategic direction, and operational oversight.
2. Key Legal Cases Shaping the Business Judgment Rule
Objective: Explore the landmark cases that have defined and evolved the application of the BJR.
- Smith v. Van Gorkom (1985): The duty of care in decision-making and its relation to the BJR.
- Aronson v. Lewis (1984): The standard for judging board decisions and establishing the BJR presumption.
- In re Caremark International Inc. Derivative Litigation (1996): The BJR's application in oversight and monitoring duties.
- Stone v. Ritter (2006): Examining the role of good faith and the implications for directors' oversight responsibilities.
- Directors' duty of loyalty vs. duty of care: Understanding the balance and how courts distinguish between them.
3. Litigating Business Judgment: Defending and Pursuing Claims
Objective: Offer insight into the litigation landscape for D&O claims and how the BJR impacts defense and pursuit of litigation.
- Litigating under the BJR: When the rule can be overcome by plaintiffs and how courts assess the decision-making process of directors.
- Strategies for defending directors and officers in lawsuits, including the use of the BJR as a key defense.
- How plaintiffs attempt to overcome the BJR (e.g., allegations of bad faith, lack of independence, or conflicts of interest).
- Case studies and trends in shareholder derivative suits and class actions.
4. How to Advise Directors and Officers to Avoid Becoming Targets of Litigation
Objective: Discuss proactive strategies for corporate advisors to help directors and officers avoid litigation exposure.
- Best practices for documenting decisions to ensure alignment with the BJR.
- The importance of maintaining a robust conflict-of-interest policy and board independence.
- Key governance practices that mitigate risks: regular board evaluations, clear delegation of authority, and transparency in decision-making.
- Ensuring compliance with statutory and fiduciary duties—particularly in distressed situations.
- The role of internal and external advisors in helping directors navigate complex situations.
5. The Role of Independent Board Directors in Mitigating Risk
Objective: Highlight the importance of independent directors in protecting the organization and its leadership from litigation.
- Defining the role and responsibilities of independent board members.
- How independent directors help reinforce the BJR in decision-making processes.
- The critical role of independent directors in distressed or bankruptcy situations.
- Best practices for selecting, empowering, and working with independent board directors to safeguard against personal liability.
Target Audience:
General Business Bankruptcy Counsel | Corporate Governance Professionals | Directors and Officers (D&O) | Litigators specializing in corporate governance and D&O cases | Financial Advisors specializing in distressed situations and workouts | CROs
Learning Objectives:
- Gain a comprehensive understanding of the Business Judgment Rule and its importance in corporate governance.
- Analyze major legal cases and their impact on the application of the BJR.
- Develop strategies for defending and pursuing litigation involving directors and officers.
- Learn proactive strategies for advising directors and officers to minimize the risk of personal liability and litigation.
- Understand the importance of independent board directors in mitigating risks for directors and officers.
Business
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