Thus a director must make a reasonable effort to make informed decisions. In most states, a director can rely on reports prepared by corporate officers or outside experts like investment banks and consultants. However, if the reports suggest making further inquiries, then relying merely on such reports is not sufficient. Many states will allow a corporation to amend the certificate of incorporation to limit or abolish a director's liability for breaches of the duty of care except in clear cases of willful misconduct or fraud. This high burden of proof is designed to protect directors who merely make poor business decisions.
All business decisions have some inherent risk and reasonable decisions can have bad results.
Thus the business judgment rule protects directors who make decisions in good faith. Compensating Board Members Directors get both tangible and intangible benefits from serving on boards. Formal compensation for serving on the board of a privately held company tends to be small. Most directors who serve on boards do so for the intangible benefits. Some of the intangible benefits of board service include keeping abreast of industry developments by overseeing the company's operations, learning strategies or techniques and the prestige of serving on a board of a prominent company.