Executives help create and grow businesses. Their role is one of implied trust, which is why they have a fiduciary duty to the organization.
A fiduciary duty is a very high legal standard of personal responsibility. An executive generally has to act in the best interests of the organization that they help run. They should put the company’s needs ahead of their own interests when making decisions about the organization.
In scenarios where shareholders or business partners realize that an executive has breached their fiduciary duty to the organization, litigation might be necessary.
What constitutes a breach of fiduciary duty?
Some breaches of fiduciary duty are intentional. Executives might embezzle from the company, or they might orchestrate business deals that enrich themselves personally or give an advantage to a business that employs their spouse. Other times, breaches of fiduciary duty relate to incompetence. Executives may make inappropriate decisions that cause verifiable harm to the business.
Regardless of intent, any choices and actions that damage the company or diminish its holdings could constitute a breach of fiduciary duty.
What solutions are available?
Shareholders and business partners can request the removal of an executive who has abused their authority. They could also seek an injunction that blocks pending transactions. In some cases, it may even be possible to hold an executive personally liable for the negative impact their failures or misconduct have had on the organization and its shareholders.
Reviewing potential breaches of fiduciary duty and the impact those errors have had on the organization can help interested parties choose the right relief to request from the board and/or from the courts. Consultations regarding matters of Business Law can help prevent damage before it is done as well as respond to it appropriately after the fact. Contact attorney Mark Tebelius for further information.