Governance and Fiduciary Issues

Can an Employee Prepare For New Employment Without Breaching Their Fiduciary Duty to their Current Employer?

Breach of Fiduciary Duty : Texas Non-Compete Law Blog

It’s long been the law in Texas that an employee can, while still employed, prepare to compete with his employer, as long as he doesn’t actually do so. If he does compete with his employer, he can be found liable for breach of fiduciary duty. In a recent case decided by the federal Fifth Circuit Court of Appeals, the court explained the reason for the preparation vs. competing distinction:

In general, an employee or other agent who plans to compete with the principal does not have a duty to disclose this fact to the principal. To be sure, the fact that an agent has such a plan is information that a principal would find useful, but the agent's fiduciary duty to the principal does not oblige the agent to make such disclosure. . . .  In this respect, the social benefits of furthering competition outweigh the principal's interest in full disclosure by its agents.

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Basics of Breach of Fiduciary Duty & Negligence Law

 

Corporate officers, directors, members, and employees owe a duty of care to the corporation.  Breach of duty is part of a negligence lawsuit.   In a negligence lawsuit there are four elements to consider: duty, breach of duty, causation and damages. For breach of duty, it must be decided whether or not the defendant, the one being accused of negligence, behaved in a way that a reasonable person would have under similar circumstances given their position with the company and level of responsibility. If no duty is owed then there is no negligence lawsuit.

For a 'No Risk' consultation with an experienced attorney handles matters involving fiduciary duty and negligence law, contact onw of our coporate and business law attorneys today.

Corporate Governance Helps Insulate Companies From Shareholder Actions

Corporate Governance provide investors with a framework to ensure compliance with fiduciary and contractual duties to shareholders and investors. Too often governance suffers as a result of a failure of formalities and systems to ensure oversight.

• Adequate shareholder control of the corporation
• Effective monitoring of management’s performance
• Effective oversight of board’s resolutions
• Close alignment of management’s and shareholders’ interests
• Increased productivity and enhanced firm value; and
• Effective deterrence of fraud and other forms of non-compliance

Successful governance policies—encompassing the litigation, regulatory, and policy-making arenas—will make corporate directors and executives more accountable to shareholders; instill confidence among investors, retail and institutional alike, in the integrity of financial markets; and protect employees, bond-holders, and other corporate constituents from fraud and egregious corporate conduct.