The "Business judgment rule" also has to be taken into consideration before any shareholder derivative action is taken against corporate directors and/or officers.
Since the capitalist system encourages risk taking to create and advance the economic interests of investors, it must also allow the flip-side, namely, the down side of failure, and thus limits liability when business decisions fail. (Otherwise, business judgment would be paralyzed by fear of liability that a decision might fail in some way.)
To put it bluntly, the Business judgment rule creates a very high standard -- you must prove bad faith, and not just bad judgment -- which must be met before a shareholder derivative suit can be sustained. So, you have to prove that those running the company are more than fools and chowder-heads, but that they are truly acting out of bad faith, which takes objective evidence that is independent from the end-result of any particular decision.
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