Final answer:
The business judgment rule requires corporate officers to act with the same level of care expected from someone in their position, not an 'ordinary person'.
Dillon's Rule limits local government autonomy. Knowledge of individual managers becomes less critical as firms establish transparent measures of performance.
Step-by-step explanation:
The business judgment rule is a legal principle that provides protection to corporate directors and officers from being held liable for decisions made in the course of business, provided they act in good faith, with the care that an ordinarily prudent person would reasonably be expected to exercise in a similar position, and in a manner they reasonably believe to be in the best interests of the company.
The statement in the question is false: the business judgment rule does not require managers to act with the care of an 'ordinary person' but rather, they must act with the care that would be expected from someone in their position.
This means that the rule acknowledges the complexities involved in managing a corporation and does not hold directors and officers to the standards of care of the general public.
Dillon's Rule, conversely, is about the authority of local governments. The rule stipulates that local governments can only undertake actions that are explicitly authorized by state law.
Dillon's Rule thus means that local governments have limited freedom and flexibility to act, which would make the statement regarding Dillon's Rule false.
As for the relevance of understanding individual managers and their business plans, it is less important as a firm becomes more established because information about the company's strategy and financial health becomes more readily available to investors.
This knowledge enables bondholders and shareholders who do not have a personal acquaintance with the managers to invest with more confidence based on the transparent information about the company's performance.