those ones delegated to them by board.
In practice, committees of board usually
hold meetings on diverse days before
presenting deliberations of their decisions
to the main board for endorsement.
Employees (staff and management) work
with policy and strategic directions as
set to them by the board. In other words,
employees have no management authority
except as directed by the board.
It is crucial to obtain a clear definition of
the word “fiduciary”. The English Oxford
dictionary defines fiduciary as; of a trust,
trustee, and trusteeship held or given in
trust.
This therefore means that those in
positions of responsibility and authority
in our governance structure of an
organization, company or associat ion -
both volunteers without compensation
and employed staff have a fiduciary duty.
That is fiduciary duty to the organizations,
including duty of care, loyalty and
obedience.
This means that they are required to act
reasonably, prudently and in the best
interests of the organizations which they
serve. They must be on look out to avoid
negligence, fraud, and conflict of interest.
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 to the company 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 a 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 legal
externalities and statutory guidelines
in their industry. This equips them to
be able to act on a fully informed basis
whenever they make decisions for the
company.
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