Corporate Law
Shlensky v. Wrigley, 95 Ill. App. 2d 173, 237 N.E.2d 776 (Ill. App. Ct. 1968)
Study notes for Shlensky v. Wrigley: professor notes, cold call prep, exam angles, and memory aids.
The business judgment rule protects directors' decisions from judicial interference when made in good faith and aimed at furthering the corporation's long-term interests.
In Shlensky v. Wrigley, the court emphasizes the sanctity of the business judgment rule, which protects corporate directors' decisions as long as they are made in good faith and are informed. The case asserts that shareholders cannot easily challenge directors' decisions, especially when those decisions are made with a reasonable belief in the long-term interests of the company. Professor discussions will focus on the implications of this ruling for minority shareholders, illustrating the tension between shareholder interests and corporate governance.
B-J-R = Business Judgment Reins
| Case | Distinction |
|---|---|
| Smith v. Van Gorkom | In Smith v. Van Gorkom, the court found that directors breached their duty by failing to inform themselves adequately, which differs from Shlensky where no such fault was alleged. |
| Dodge v. Ford Motor Co. | In Dodge v. Ford, the court ruled against the directors when they acted against shareholders' financial interests; Shlensky did not establish that the directors acted against shareholder interests. |
The rule promotes director independence and encourages them to make decisions without fear of second-guessing by shareholders, which can foster innovative and long-term planning.
Critics argue this rule can permit directors to neglect shareholder interests, potentially leading to poor governance and a lack of accountability.
This case often appears on exams as a vehicle for discussing the business judgment rule and shareholder rights. Expect questions that explore the interplay between director discretion and shareholder interests.