Answer:
The business judgement rule states that if the board takes decision in good faith and in best interest of the corporation considering the information available then its decision is not to be questioned by the courts. The courts can intervene only if there is any breach of good faith, due care or loyalty.
The above case is similar in facts with another case paramount vs time. In that case Time decided to merge with another company named Warner. Paramount also started bidding for Time but the directors of Time rejected their bid offer citing that warner merger would be more suitable for the company strategy.
Paramount then brought the case against Time in court.The court stated that the instant case was different from another case (REVLON VS MacAndrews) where Revlon was up for sale and hence it was necessary for the board to sell its assets to the highest bidder.
Based on the information given, the board was not in violation of the business judgment rule.
The business judgment rule requires directors and officers to act in the best interest of the shareholders and corporation.
According to the business judgment rule, the main task of managers is to act in the best interest of an organization. Therefore, if Paramount board rejected QVC’s bid on the grounds that a Viacom merger would be more in keeping with Paramount’s business strategy, the board hasn't violated the judgment rule as they are acting in the best interest of the company.
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