Fiduciaries are accountable when they breach their fiduciary duties. The accountability that adjusts behavior most often, is in the form of a lawsuit for money damages flowing from the alleged breach of the fiduciary duties.
Questions arise concerning the duties and relationships, if any, that are owed by and among corporate officers, directors, shareholders and consumers. Lawsuits have reportedly been filed challenging the decisions of officers or directors to enter into certain mergers and acquisitions. See generally Julie Creswell, "Market Place/Price Paid For Merrill Is Rising" p. B1, col. 6 (New York Times Nat'l Ed., Business Day Section, Saturday, January 24, 2009).
Some question compensation decisions. They point to the presumed "fiduciary duties" of a corporation's compensation committee concerning officers or employees who may have been paid too much money for the services that were, or were not, performed to the corporation's benefit.
Some of these questions start out concerning all fiduciaries, then they tend to be asked only about highly publicized individuals. Fiduciary duties belong to all fiduciaries, not just a few. Many of the alleged breaches of fiduciary duties seem to center around the spending of shareholder money by officers and directors of publicly held corporations. In particular, questions about fiduciary duties arise in this context especially when the spending in question confers a personal benefit on the indivdual which appears to be at odds with any perceived benefit to the publicly owned corporation.
Broadly stated, examples of questioned behavior by officers of publicly held corporations have recently included:
$1.2 Million to redecorate an office;
$87,000 for a rug;
$68,000 for a credenza;
$35,000 for a water closet utility device (i.e., a commode); and
Paying bonuses earlier than ever before in history, days before the corporation was acquired by another corporation which received Federal Taxpayer Money in order to acquire the first corporation. See, e.g., Julie Creswell and Louise Story, "John Thain, Merrill's Former Head, Is Out At Bank of America" p. A1, col. 1 (New York Times Nat'l Ed., Friday, January 23, 2009), published online with the headline, "Thain Resigns Amid Losses at Bank of America"; Andrew Ross Sorkin, "Dealbook/The Titans Take It On The Chin" (New York Times Online Tuesday, January 27, 2009)
These are decisions made by one person, as it turns out, but similar seeming self-preferential decisions have been made by many corporate officers and have recently come to light.
Officers are not alone in being the focus of questions concerning possible breaches of fiduciary duties. Directors too have come under scrutiny. Directors are not always figureheads; at one corporation alone, they reportedly receive "upwards of" $200,000.00 a year in compensation for serving as directors -- yet, at that same corporation, a bank, reportedly "shareholder advocates" have some concern because only 2 out of 17 (soon to be 20) total directors are known to understand the workings of that bank, i.e., "to understand financial risks and rein in managers." Louise Story and Julie Creswell, "Bank of America Board Under Gun From Critics" p. B1, col. 2 (New York Times Nat'l Ed., Business Day Section, Wed., January 28, 2009).
Culpable or not, officers and directors would be well advised to make sure that the appropriate Director's and Officer's Insurance Companies are faithfully paid their Premiums and that they have been and wil continue to be put on notice of these charges and claims -- and lawsuits if any. See also a post on www.insuranceclaimsissues.typepad.com concerning such damages claims potentially involving Fiduciary Duties and Director's and Officer's Insurance Coverage if any.
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