I consider this to be very similar to the Business Judgment Rule that protects CEOs and executives against lawsuits from shareholders for actions they did in their job, even if their actions turned out to be a mistake and lost the shareholders a bunch of money. To proceed with a lawsuit, the plaintiff has to demonstrate that the executive took unreasonable actions which directly resulted in harm to the plaintiff. Basically, their actions were out of the scope of their mandate, and they can be sued.

For example, the CEO hires their clueless spouse to a high paying job and the spouse loses the company a ton of money. That does not sound like the CEO was doing their job, but rather it sounds like they were putting their spouse ahead of the company. Here a lawsuit would certainly be allowed to go forward.

https://www.investopedia.com/terms/b/businessjudgmentrule.as...