Fiduciary Duties of Board of Directors
Duty to avoid conflicts of interests - potential conflict of interest may occur when director: receives a gift from a third party he is doing business with, either directly or indirectly enters into a transaction or arrangement with that company, obtains substantial loans from the company, or engages in backdated stock options.
Fiduciary Duties and Business Judgment Rules - directors operate under a legal doctrine called “business judgment rules”. Under that law directors that make decisions in good faith, based on rational reasoning, and an informed manner can be protected from liability to the company’s shareholders in the ground that they appropriately fulfilled their fiduciary duty of care.