What does the "business judgment rule" protect?

The business judgment rule is a legal principle that protects directors and officers of a corporation when they make decisions in the best interests of the company, assuming those decisions are made in good faith, with due care, and in what they believe to be the best interests of the corporation. This rule recognizes that directors are often required to make decisions under conditions of uncertainty and that not all decisions will lead to favorable outcomes. As long as their decisions are made honestly and informed, they are generally shielded from personal liability for those decisions. This protection encourages directors to take necessary risks and make strategic choices without the fear of being held legally accountable for potential failures or poor outcomes, provided they acted within the scope of their authority and with proper motivation.

In contrast, the other choices don't accurately reflect the essence of the business judgment rule. For example, while it does indirectly support shareholder interests by allowing directors to make bold and necessary decisions, it does not specifically focus on their rights during board meetings. It also does not offer blanket protection against external lawsuits or shield management decisions from regulatory scrutiny, as both of those scenarios involve different legal considerations beyond the scope of the business judgment rule.