When making business decisions on behalf of a corporation, it is presumed that corporate directors act in compliance with the above-referenced statute, by acting on an informed basis, in good faith and with ordinary care. This presumption is judicially created and is known as the business judgment rule. The business judgment rule is based on the premise that directors, for the most part, are more capable of making business decisions than are judges. Thus, where the rule is applicable, corporate directors will not be held liable for decisions made when conducting the business and affairs of a corporation.
Florida case law provides four elements which must be present for the business judgment rule to act as a shield to director liability: (a) the decision under review must be a business decision; (b) the director must not receive a personal benefit from the transaction ; (c) the director must exercise due care; and (d) the director must exercise good faith. F.D.I.C. v. Stahl, 854 F. Supp. 1565, 1570-1571 (S.D. Fla. 1994).
Therefore, the business judgment rule only protects directors only when they are carrying out their duties as directors, (e.g., making decisions and analyzing issues as directors). The business judgment rule is also inapplicable when the director furthers his self-interest. “A director is considered interested where he or she will receive a personal financial benefit from a transaction that is not equally shared by the stockholders, or will suffer a detrimental impact from the proposed transaction.” McCabe v. Foley, 424 F. Supp. 1315 (M.D. Fla. 2006).