In a new twist to the ever-evolving legal world of corporate governance, we are faced with a potent combination: the misappropriation of corporate opportunities meets faithless servant doctrine. Shedding light on this new development is an informative blog by Farrell Fritz, P.C featured on New York Business Divorce.
The misappropriation of corporate opportunity represents a unique breach of fiduciary duty. As per the corporate opportunity doctrine, fiduciaries or employees of a corporation cannot divert or exploit, for their personal benefit, any opportunity that should rightly be an asset of the corporation.
The faithless servant doctrine, on the other hand, is a well-established rule designed to protect employers. In essence, this doctrine stipulates that an employee who is found guilty of disloyalty can owe their employer any compensation received during the period of disloyalty.
The real interest is in observing how, when converged, these two doctrines can potentially change the game in corporate law. This combination could essentially mean that an employee who misappropriates a corporation’s opportunity for personal gain could be liable for their compensation during the period of misbehavior, thanks to the faithless servant doctrine.
While the implications of this new reality are still being evaluated and understood fully, one thing is clear: corporate employees and fiduciaries need to exercise the utmost level of diligence and caution. Not only could they be ousted for exploiting company assets, but they could also potentially lose their earnings during the disloyalty period.
Law firms and legal departments at corporations would do well to familiarize themselves with these developments and update their internal governance policies accordingly to mitigate any potential risk.