What does the Business Judgement Rule (BJR) require from the board of directors?

The Business Judgement Rule (BJR) requires the board of directors to follow their duties of care and loyalty. This principle emphasizes that the board must make decisions that are informed, prudent, and in good faith, while acting in the best interest of the association or corporation. The rule provides a level of protection for directors against personal liability for decisions that result in negative outcomes, as long as those decisions are made with due care and loyalty to the organization.

The duty of care entails ensuring that directors make reasonable inquiries, gather relevant information, and actively participate in the decision-making process. The duty of loyalty requires directors to act without personal conflict and to prioritize the interests of the community they serve. By adhering to these duties, the board helps foster trust and accountability within the organization, which is essential for its proper governance and operational success.

In contrast, prioritizing personal interests over corporate interests would violate both the duty of loyalty and the fundamental principles of the BJR. Similarly, operating in secrecy undermines the transparency and accountability expected of board members. Making decisions solely based on majority votes does not reflect the conscientious approach required under the BJR, as it does not necessarily ensure that every decision is made with the necessary due diligence or care.