The obligations involved with running a business can be immense. But owners aren’t the only one who has responsibilities to fulfill. Depending on the structure of the business at hand, there may be several other individuals who need to fulfill their duties in order to make the business run smoothly and protect its financial interests.
Some individuals who work for a business may carry a fiduciary duty. These individuals are tasked with putting the interests of the business first, which might sound simple enough. However, there are problems with the fiduciary duty all the time, which can put a business’s financial earnings and stability at risk.
What does the fiduciary duty entail?
There are multiple aspects to the fiduciary duty. This includes:
- The duty of loyalty: This duty essentially means that the fiduciary will put the interests of the business and its shareholders above their self interests. If the fiduciary stands to gain financially from a business move, then their duty of loyalty could be implicated.
- The duty of care: To ensure that they’re making decisions that are best for the business, those who have a fiduciary duty are required to be diligent and informed in their decision-making. The fiduciary must truly believe that their decisions are best for the business, and those choices must be made with the same level of care that a reasonable person in the same or similar situation would have exercised.
- Duty of good faith: Here, the fiduciary must avoid willful blindness and conscious disregard of matters that may be harmful to the business.
Texas courts have regularly recognized the fiduciary duty to include:
- Full disclosure
- Good faith
Which employees have a fiduciary duty?
A business might have a number of employees who owe the company a fiduciary duty. Amongst those who may have a fiduciary duty include corporate officers, like the company’s president and vice president, as well as directors who sit on the Board. But other executives and partners can also have a fiduciary duty. When any one of these individuals breaches their duty, a business can be significantly disadvantaged.
Other professionals and parties who have a formal fiduciary duty to their clients include agents, trustees, guardians, doctors, realtors and attorneys.
How does a breach of the fiduciary duty occur?
In many instances, the fiduciary duty is intentionally breached because the fiduciary seeks financial gain. For example, a corporate president might steer the business’s decisions to execute a contract because he benefits as a shareholder of that other company. In other instances, a fiduciary might disclose confidential information about the business in a harmful way because they’re being paid by another entity to disclose that information.
But not all breaches of the fiduciary duty are intentional. Sometimes those who have a fiduciary duty simply fail to live up to their obligations. Their dereliction of duties and willful blindness can be extremely harmful to the business, thereby rendering it unacceptable.
What should you do if you suspect that the fiduciary duty has been breached?
If you think that a fiduciary duty has been breached, then you need to investigate the matter to see if there’s evidence to support your suspicions. If you end up finding evidence of wrongdoing, then it might be time to take legal action to protect the business and your own financial interests.
Although these can be complicated matters, you shouldn’t let that deter you from taking the action that you think is best. After all, foregoing a legal claim could put you in a position that you don’t deserve and that you never expected. Therefore, it’s a good idea to fully consider your options and act on those that you think are best under your circumstances.