Final answer:
Reasonable care is a subjective test used to assess if a manager has met their fiduciary duty by acting with the care an ordinarily prudent person would in similar circumstances, as part of the business judgment rule in corporate governance.
Step-by-step explanation:
Using reasonable care is often regarded as a subjective test for determining if a manager has fulfilled their fiduciary duty towards the corporation they serve. This determination involves assessing whether a manager's actions were made with the care that an ordinarily prudent person in a similar position would use under comparable circumstances. Reasonable care is part of the larger legal concept of the business judgment rule, which provides managers a certain degree of immunity from being second-guessed on their business decisions, provided they acted with the care that a reasonably prudent person would have used.
The business judgment rule is intended to allow managers to make decisions without fear of being liable for honest mistakes of judgment, provided they weren't grossly negligent, and they were acting in what they believed to be in the best interests of the company. This rule acknowledges that management decisions often require a balancing of competing interests and risks, where hindsight may not fairly depict the managers’ predicament at the time the decisions were made.