The Study Of Indigenization Of The Business Judgment Rule

The board of directors plays a key role in the internal corporate governance.However,under the influence of specific historical situations and the path dependency theory,the board of directors in China faces the dilemma of imbalance between authority and liability.The chaos above may hinder the progress of the corporations in China.Therefore,it is worth studying the business judgment rule originated from the conflict between authority and liability in the USA.Given the previous contributions both in theory and in practice,the study of indigenization of the business judgment rule is in place.Considering its multi-faceted feature,the study of indigenization of the business judgment rule should not be easily troubled by the expression of definition.The idea of the balance between authority and liability shall persist throughout the process of indigenization.Guided by the idea of the balance between authority and liability,the study of indigenization of the business judgment rule should focus on the consensus amongst the common elements of the business judgment rule which are comprised of “good faith”,“informed basis” and “freedom from conflicts of interest” in order to avoid alienation.The focal point of indigenization is the conceptual reconstruction of the fiduciary duty.The conceptual reconstruction of the fiduciary duty overcomes the difficulties caused by the traditional separation of the fiduciary duty from the perspective of“capacity” and “integrity”.The traditional separation of the fiduciary duty from the perspective of “capacity” and “integrity” may deviate from the essence of the idea of the balance between authority and liability because the narrow interpretation of the duty of care as well as the duty of loyalty may result in protection loopholes and accountability flaws during the application of the business judgment rule.With an eye to the implementation of the idea of the balance between authority and liability,the conceptual reconstruction of the fiduciary duty aims at restoring the genuine meanings of the common elements of the business judgment rule in the real world of business and cleaning up the misunderstanding caused by the traditional separation of the fiduciary duty.The conceptual reconstruction of the fiduciary duty demonstrates the rationale for the simplification of the duty of care and reveals the wisdom behind the gradation of the duty of loyalty.Only in this way can the study of indigenization ofthe business judgment rule succeed.The key point of indigenization is the adaptation of the judicial system.The implementation of the idea of the balance between authority and liability is the first priority in this part.The implementation of the idea of the balance between authority and liability theoretically reinforces the idea of judicial constraint and successfully draws a distinction between the business judgment rule and the paradigm of tort law.With the implementation of the idea of the balance between authority and liability,the study of indigenization of the business judgment rule shall uphold the idea of judicial constraint and take the “reasonable person” standard seriously.In addition,the judicial review is directed by the implementation of the idea of the balance between authority and liability.Procedural review and substantive review are of equal importance due to various patterns of business ownership in different nations.However,Procedural review and substantive review share the same idea of the balance between authority and liability.Therefore,the courts shall take the specific status of authority and liability into consideration and make a choice between the two accordingly.