fiduciary responsibility

Examples of fiduciary responsibility in the following topics:

• Ethical Considerations

  • If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility.
  • Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, and the company's fiduciary responsibility to its shareholders.
  • For example, in response to a number of major corporate and accounting scandals -- including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom -- the Sarbanes-Oxley Act (SOX) of 2002 was put into place.
  • SOX -- also known as the "Public Company Accounting Reform and Investor Protection Act" in the Senate and "Corporate and Auditing Accountability and Responsibility Act" in the House -- is a United States Federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms.
  • The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the law.

• Managers Role in Ethical Conduct

  • Managers are responsible for upholding the ethical code and helping others to do so as well.
  • Of course, managers are responsible for upholding ethical standards in their own actions and decisions.
  • Fiduciary duty is an example that applies to some managerial roles.
  • A fiduciary must put the interests of those to whom he is accountable ahead of any interests, and must not profit from his position as a fiduciary unless the principal consents.
  • Additionally, managers may be responsible for creating and/or implementing changes to an organization's ethical codes or guidelines.

• Employee Retirement Income Security Act

  • Sets minimum standards for participation, vesting, benefit accrual, and funding. provides fiduciary responsibilities for those who manage and control plan assets.
  • Gives participants the right to sue for benefits and breaches of fiduciary duty

• Ethical Issues Within a Business

  • Broadly speaking, ethical issues in business include the rights and duties between a company and its employees, suppliers, customers, and neighbors, and its fiduciary responsibility to its shareholders.

• Price/Earnings Ratio

  • Managers have strong incentives to increase stock prices, firstly as part of their fiduciary responsibilities to their companies and shareholders, but also because their performance based remuneration is usually paid in the form of company stock or options on their company's stock (a form of payment that is supposed to align the interests of management with the interests of other stock holders).

• Corporate Social Responsibility

  • Corporate ethics is the ethics of corporate social responsibility (CSR), not corporate personal responsibility.
  • The responsibility of a corporation is shaped by two realities: the obligations created by society through (1) law and public policy (legal responsibilities), and (2) the obligations created by corporate culture, i.e. stakeholder (customers, employees, neighborhoods, natural environments) obligations.
  • But when a company that makes computers gives 100 laptops to the public school system, and does so with the hope that exposing children to their brand of computers will lead to increased sales—this "doing good to do well" is not only laudable, it is responsible—responsible both to shareholders and the stakeholders.
  • The law says corporations have a fiduciary responsibility (fiduciary = the highest standard of loyalty and trust owed by agents to principles) to their shareholders, who are the legal owners of the corporation.
  • Corporate ethics is therefore really about the creation of a culture of responsibility within the corporation.

• Profit and Stakeholders

  • In the traditional view of the firm, the stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first and to increase value.
  • Stakeholders, as opposed to shareholders, tend to focus on corporate responsibility over corporate profitability.
  • In the field of corporate governance and corporate responsibility, a major debate is ongoing about whether the firm or company should be managed for stakeholders, stockholders (called "shareholders"), or customers.

• The Definition of Money

  • Money comes in three forms: commodity money, fiat money, and fiduciary money.
  • Fiduciary money includes demand deposits (such as checking accounts) of banks.
  • Fiduciary money is accepted on the basis of the trust its issuer (the bank) commands.

• Types of Organizations

  • Typically, shareholders do not actively manage a corporation; instead, they elect or appoint a board of directors to control the corporation in a fiduciary capacity.
  • Corporate social responsibility (CSR), also called corporate conscience, is a form of corporate self-regulation integrated into a business model.
  • CSR can also be a process that helps organizations embrace responsibility for the company's actions while encouraging a positive impact through its activities on the environment, consumers, employees, communities, stakeholders, and all other members of the public sphere who may also be considered stakeholders.

• Conflicts of Interest

  • An example of using a third-party to establish an 'arm's length' or fair transaction would be where a corporation that leases an office building that is owned by the CEO might get an independent evaluation showing what the market rate is for such leases in the locale, to address the conflict of interest that exists between the fiduciary duty of the CEO (to the stockholders, by getting the lowest rent possible) and the personal interest of that CEO (to maximize the income that the CEO gets from owning that office building by getting the highest rent possible).
  • A conflict of interest could impair an individual's ability to perform his or her duties and responsibilities objectively. "