As they say, in the event that the
fiduciary duties of care, loyalty
or obedience are breached, the
individual breaching the duty is
potentially liable to the company for
any damages caused as a result of
this breach.
The fiduciary duty applies to all
board members, employees and
those assigned responsibility by the
board. As a matter of fact, the duty
of care is very broad. It requires
directors, managers and staff to
exercise ordinary reasonable care in
performing their duties. They must
exhibit honesty and good faith. They
must act in a manner which they
believe to be in the best interest
of the company, and with such
care, including reasonable inquiry,
as an ordinary prudent person in
alike position would, under similar
situation.
The “business judgment rule”
protects officers and directors from
personal liability for actions made
in poor judgment as long as there
is reasonable basis to indicate the
action was undertaken with due care
and in good faith.
On duty of loyalty, the responsibility
of directors and staff is to be faithful
to the company which they serve.
In other words, directors and staff
must give undivided allegiance to
the company when making decisions
affecting the company. Personal
interest should not conflict with
company interest. If they do, then
the one of the company holds.
Examples of personal interest may
include outside business, professional
or financial interests etc. Where
there is potential conflict of interest,
directors and staff are expected to
disclose and even avoid attending
meetings where such matters are
being discussed.
Lastly, under fiduciary duty, directors
and staff are expected to be obedient
to the company. This calls for duty
of obedience. This requires directors
and managers to act in accordance
with the company’s articles of
association and related by-laws.
In conclusion, a board and managers
must be conversant with the need for
compliance and guidelines in their
industry. This makes them be able
to act on a fully informed basis. It
reinforces the importance of duty
of care, oversight, and fiduciary
responsibility.
Felix Owaga Okatch is a Multilateral
Trade Expert and author of ‘Marketing
Management, Integrated Perspectives’
published by Kenya Literature Bureau.
You can commune with him on this or
related issues via mail at: Okatchfelix@
gmail.com. Views expressed herein are
personal and made for academic and
educational purposes only.