Your not understanding the term as it correlates to Directors and officers of a public company.
Fiduciary Relationship Between Board Members and Shareholders
A similar fiduciary duty can be held by corporate directors, as they can be considered trustees for stockholders if on the board of a corporation, or trustees of depositors if they serve as the director of a bank. Specific duties include the following:
Duty of Care
Duty of care applies to the way the board makes decisions that affect the future of the business. The board has the duty to fully investigate all possible decisions and how they may impact the business. If the board is voting to elect a new chief executive officer (CEO), for example, the decision should not be made based solely on the board’s knowledge or opinion of one possible candidate; it is the board’s responsibility to investigate all viable applicants to ensure that the best person for the job is chosen.
Duty to Act in Good Faith
Even after it reasonably investigates all the options before it, the board has the responsibility to choose the option that it believes best serves the interests of the business and its shareholders.
Duty of Loyalty
Duty of loyalty means the board is required to put no other causes, interests, or affiliations above its allegiance to the company and the company’s investors. Board members must refrain from personal or professional dealings that might put their own self-interest or that of another person or business above the interest of the company.
If a member of a board of directors is found to be in breach of their fiduciary duty, they can be held liable in a court of law by the company itself or its shareholders.
