Question

once a person accepts their appointment as a director on a board, they have a fiduciary duty. List four aspects of their fiduciary duty and discuss the meaning and implication of each. You may also use practical examples what it entails.

Answer 1

Corporate Governance is very vital factor for any company to have healthy operational and financial status and growth. This in simple words, means a set of rules, procedures, policies or framework advocated in the company and are used in each and every aspect of the operations of the company. This brings up discipline within the organisation and helps in controlling any unethical practices etc.

The Board of Directors have to keep up certain practices to hold the Corporate Governance as utmost priority in every aspect of running the company effieciently.

Two vital features which any member of the Board should possess are they should be knowledgeable and straightforward and ethical in nature.

The Board is generally considered as the knowledge house with lots of business ideas churning to give the best results oriented ideas to the next level Management to implement for the benefit of the company. Apart from the routine operations / business of the company, the Board is looked upon for the strategic ideas for the company either to uplift from the turbulent situations or to expand its business / value creation for the business. Hence, the members of the Board are expected to be knowledgeable in multiple ways to best argue of the plans and result in the best decision making.

Being straight forward and being ethical are utmost important nature of the members of the Board. The Board is considered as the representative body on behalf of the shareholders. Hence, at all times, the Board is required to maintain the standards of highest ethics to keep the trust of shareholders. Any unethical practices or tranasctions with conflicting interest are required to be higlighted and questioned immediately. There should not be any room for any sort of unethical transactions.

Apart from the above, the below other factors are as well of high importance:

The directors should practise utmost caution incase of any transactions with any conflict of interest. In case of any related party transactions or other transactions with direct or indirect influence, the same need to be tabled before the Board of Directors and are required to be critically examined before execution of such transactions.

Also, being a director on the Board, as one can observe, they have extensive rights on the operations of the compnay; However, the director should be cautious and diligent interms of their involvement and its extent in the operations or decision making of the company activities.