Investors frequently wonder how BoDs get away with some things. How do they approve crappy M&A deals? Grant excessive exec comp? Enact entrenching bylaws? Why can't or don't we sue directors over what seems like slam-dunk cases of waste, sloth, or stupidity?

The very short answer is, stupidity is not illegal. Sure, shareholders can sue directors, since in the US anyone can sue anyone else for just about anything. But, almost all of the time we won't win. So, a longer, more formal answer is, a legal principle called the business judgement rule protects directors from liability in most situations.

A current blog post explains this for portfolio managers, free of legal citations and jargon. 

The New Pay Ratio Rules Are Here! (yawn) (8/6/15 email)

You can find other useful resources at the TAI website, including our research on "Effective Activism", our new resource guides on attorneys for activist investors and on activist investing data sources, our white paper with the basics on activist investing, and our new guides on exempt solicitation, consent solicitation, and special shareholder meetings.