When it comes to running a business, the CEO or Managing Director bears the heavy weight of responsibility, not just to the board of directors who appointed their candidate, but also to the many individual shareholders who relied on this very critical decision.
Ultimately, it is these shareholders whose investment is on the line, totally dependent on what is often an incredibly fragile link. Also, one must not forget the welfare of the company’s workforce, most of whom will have joined the business with a real want to work and support the direction of their bosses, ensuring a continued combination of income, reward, prosperity and most importantly, increased shareholder value. If this equation is breached for any reason, it can more often than not lead to negative consequences and only compound any problems in hand.
Fiduciary Duty has often been declared “A Sacred Obligation”. This is due to the lives of so many hinging on the actions of the CEO and how he or she conducts his or her activities while demonstrating the highest moral integrity. It is at the heart and soul of a CEO’s responsibilities to shareholders in prioritizing their financial well being. A failure in fulfilling these duties will inevitably result in a “Breach” of Fiduciary Duty and loyalty to their firm!
As I have already eluded, any “corporate” duty of loyalty requires executives to always act in the best interest of the company and its shareholders. This means avoiding conflicts of interest, not using corporate opportunities for personal gain, and not engaging in transactions that could harm the company or unduly benefit the executive at the expense of the shareholders.
Breaches of the duty of loyalty often involve self-dealing, insider trading or other forms of misconduct that lead to personal enrichment including:
- Sharing an employer’s trade secrets
- Failing to follow the employer’s directions
- Improperly using or failing to account for employer’s funds.
- Acting on behalf of a competitor
- Failing to exercise care in carrying out duties and
- Profiting at the employer’s expense.
Shareholders that believe their CEO failed them through breaching any such duty of care, can and often, hold the individual accountable with a lawsuit. This can lead to financial compensation to help cover losses because of the breach, as well as serve as a deterrent for future errors of judgement.
There are indeed many such cases setting multiple precedents for employers to seek recompense as such actions have a parallel to espionage and political breaches of loyalty where the consequences of such breaches can be even more disastrous and the penalties even more severe!
Unfortunately, greed can be a determined motivator and often, carry a heavier weight, pushing individuals into making wrongful decisions and as such exposing their company to financial losses or in the case of state level espionage, exposing their country to an increased level of threat. History has shown that even the most honourable individuals can fall into this “honey trap” and be misguided, very often oblivious that they have taken the wrong turn.
Trust in my opinion remains paramount when it comes to the appointment of key executives . Any inkling of doubt should be handled swiftly to avoid any possible breach of this “sacred obligation”.