Legal Question in Business Law in California

You're probably referencing the "fiduciary duty" owed by Directors to the shareholders of a corporation.

Stuff like this won't be found in the Codes. First, there is not and could not be a law forbidding corporations to "say anything against their businesses." Corporations have First Amendment free-speech rights and, in addition, in many cases would have a legal and moral duty to speak the truth, even if it were harmful to their immediate interests. Protecting the shareholders at all costs is not a legal or ethical goal for corporations.

However, as Mr. Browning notes, the officers and directors of corporations have so-called fiduciary duties to the corporation and its stockholders (and perhaps also to its employees, suppliers/creditors, customers and community) to run the business using good judgment and without conflict of interest.

The so-called "Business Judgment Rule" is a large and amorphous mass of concepts, court decisions, statutes, policies and thousands of pages of treatises and law-journal articles. In sum, it more-or-less defines what corporate directors (and their hirelings, the corporate officers) may or may not do without violating their duties to act wisely in managing the corporation. Sometimes, proper "business judgment" may dictate keeping mum about a particular opportunity, development or problem. In other situations, it would be entirely appropriate, perhaps even necessary, for the director or officer to speak out, or order the corporation's PR Dep't. to speak out, about an issue that might reflect negatively on the company. One of the reasons is that if the bad news leaks out unofficially, it may do more harm than if it were officially and promptly announced. Another is that insiders cannot trade on undisclosed information without violating the insider-trading laws.

Please take note of the many corporate releases that contain bad news, such as product recalls, lowered earnings forecasts, etc.