No, a company cannot be sued for failing to maximize shareholder value. The business judgment rule protects any company that wants to raise wages, refrain from layoffs, donate to charity, offer sick leave, etc. What they can’t do is not pursue profit at all. Now, will shareholders vote them out if they do those things? Maybe, but that’s a totally different mechanism than a lawsuit.
As I understand business judgement rule makes the assumption that the company did its decisions in good faith. It doesn’t mean a shareholder derivative lawsuit can’t happen. The shareholders can still sue, and there have been instances where it has been done, but in addition to suing the shareholders would then have to prove loss of profits alongside negligence or bad faith or whatever led to the loss of profits.
Realistically this shouldn’t happen as it probably costs more to prove the company didn’t make every penny of profit it could, but we live in weird times where things that shouldn’t happen do happen so let’s not count out the improbable.
No, a company cannot be sued for failing to maximize shareholder value. The business judgment rule protects any company that wants to raise wages, refrain from layoffs, donate to charity, offer sick leave, etc. What they can’t do is not pursue profit at all. Now, will shareholders vote them out if they do those things? Maybe, but that’s a totally different mechanism than a lawsuit.
As I understand business judgement rule makes the assumption that the company did its decisions in good faith. It doesn’t mean a shareholder derivative lawsuit can’t happen. The shareholders can still sue, and there have been instances where it has been done, but in addition to suing the shareholders would then have to prove loss of profits alongside negligence or bad faith or whatever led to the loss of profits.
Realistically this shouldn’t happen as it probably costs more to prove the company didn’t make every penny of profit it could, but we live in weird times where things that shouldn’t happen do happen so let’s not count out the improbable.