This feature originally appeared in the July 20th edition of the Pittsburgh Business Times.
Q. What are the fiduciary duties of the board of directors for a company or organization?
Advice: Board members have two primary duties, the duty of loyalty and the duty of care. If they exercise these duties properly, the will likely be shielded from liability for those decisions.
The duty of loyalty imposes on the board an affirmative duty to protect the interests of the corporation, and also an obligation to refrain from conduct that would injure the corporation and its shareholders. Board members must avoid any conflict between the interests of the organization and self-interest. Undivided allegiance to the corporation’s best interest is required. In the event of conflict between these interests, disclosure is a best practice.
The duty of care requires directors to make a business decision based on all available information and to act in an informed manner. Board members must believe that their actions promote the best interest of the company based on a reasonable investigation of the options available. They should take the time to review information, attend meetings and ask questions to make sound decisions.