Business judgment rule

The business judgment rule as optimal standard of care

Why agents need discretion: The business judgment rule as optimal standard of care∗

Should managers be liable for ill-conceived business decisions? One answer is given by U.S. courts, which almost never hold managers liable for their mistakes. In this paper, we address the question in a theoretical model of delegated decision making. We find that courts should indeed be lenient as long as contracts are restricted to be linear. With more general compensation schemes, the answer...

Does Social Judgment Diminish Rule Breaking?

We experimentally investigate the extent to which social observability of one’s actions and the possibility of social non-monetary judgment affect the decision to engage in rule breaking behavior. We consider three rule breaking scenarios — theft, bribery and embezzlement — in the absence of any formal enforcement mechanism. By involving a student sample characterized by cultural heterogeneity ...

Business Rule Modality

A business domain is typically constrained by business rules. In practice, these rules often include constraints of different modalities (e.g. alethic and deontic). Alethic rules impose necessities, which cannot, even in principle, be violated by the business. Deontic rules impose obligations, which may be violated, even though they ought not. Conceptual modeling approaches typically confine th...

The Business Rule Approach

Today, a business faces fast changing environments which require frequent adaptations of parts of the business. These adaptations of the business are usually delayed to a great extent by the entailed modification of the business’s applications. Consequently, the business looses much time and money with adapting the applications’ behaviour and therefore cannot keep pace with changing environment...