The Business Judgment Rule Requires Reasonable Management Practices By Anthony J. Fejfar, B.A., J.D., Esq.

, Coif ©Copyright 2010 by Anthony J. Fejfar The Business Judgment Rule requires that all management practices of a business be reasonable. Natural Law requires this. Every business is entitled to make a reasonable profit, and no more. Business management is required to pay employees a reasonable salary or hourly rate, with reasonable working conditions. Moreover, business managers and business executives are only entitled to receive a reasonable salary. Corporate stockholders are only entitled to receive a reasonable return on their investment. Historically, Blue Chip stocks have paid a 5% annual dividend. It is Ultra Vires, that is, illegal, for a corporation to pay more than a 12% annual dividend. If there is extra money available it should be invested by the company in employee benefit programs, educational grants and scholarships for students, research and development, and the expansion of business operations. Money should also be invested in diversifucation of business operations to help avoid business downturns in a particular area. It is not reasonable to profit maximize in the short term, and, at the same time, the company must make a reasonable profit in the short term. Money can also be place into Trusts for the benefit of the community to help the poor, the mentally ill, the mentally retarded, the physically handicapped, and the unemployed.

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