In Otis, a shareholder's derivative action alleged that corporate directors failed to obtain the best price available in the sale of Securities by dealing with only one investment house and by generally neglecting to "shop around" for the best possible price, resulting in a loss of nearly half a million dollars. Under the business judgment rule, the officers and directors of a corporation are immune from liability to the corporation for losses incurred in corporate transactions within their authority, so long as the transactions are made in good faith and with reasonable skill and prudence. To help directors and officers meet these challenges without fear of liability, courts have given substantial deference to the decisions the directors and officers must make. They may also face potential hostile takeovers by other businesses.
They often face difficult questions concerning whether to acquire other businesses, sell assets, expand into other areas of business, or issue stocks and dividends. The directors and officers of a corporation are responsible for managing and directing the business and affairs of the corporation. A legal principle that makes officers, directors, managers, and other agents of a corporation immune from liability to the corporation for loss incurred in corporate transactions that are within their authority and power to make when sufficient evidence demonstrates that the transactions were made in Good Faith.
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