Business litigation sometimes involves partners fighting about the future of the organization. Other times, employees might sue due to a violation of their wage rights. Occasionally, shareholders or other concerned parties may take legal action to address misconduct by executives.
Business leaders in executive roles generally have a fiduciary duty to the company that they help run. They receive competitive compensation packages for assuming that duty and the hectic schedule that comes from overseeing the organization’s operations.
When others can credibly assert that a breach of that duty occurred, litigation could follow.
What constitutes a breach of fiduciary duty?
A fiduciary duty requires that a person put another party’s interest ahead of their own. An executive should put the company’s success and profitability ahead of their own preferences or enrichment.
A breach of fiduciary duty could be intentional. In many cases, allegations relate to embezzlement or other forms of financial misconduct. However, a breach of fiduciary duty could just as easily relate to incompetence.
When business leaders make poorly researched and illogical decisions about company operations, their choices can diminish the company’s success and profitability. If shareholders or other concerned parties can convince the courts that a breach of fiduciary duty occurred, it may be possible to remove an executive from their position or to hold them financially accountable.
Documenting questionable business choices can help prevent those running businesses from abusing their authority or damaging the company through incompetence. A lawsuit brought on the basis of a breach of fiduciary duty can help protect the company and the parties who have invested in it.