Corporate Officers in California Need to Be More Careful than Directors
In California, the so-called Business Judgment Rule (“BJR“) protects corporate directors. They are not responsible for honest mistakes of business judgment. A recent case revealed that the BJR does not protect corporate officers in California.
During 2007, Indymac Bank bought more than $10 billion in risky residential loans. These loans ultimately generating losses of more than $600 million. Indymac closed. The Federal Deposit Insurance Corporation was appointed receiver.
Directors’ Fiduciary Obligations: Delaware vs. California
Delaware: Paying Ovitz $130 million was not grossly negligent.
In Why are So Many Corporations Formed in Delaware?, I stated that Delaware law minimizes directors’ responsibility for decisions that have made. This post explains my point by comparing Delaware and California law regarding directors’ fiduciary obligations. (more…)
