MYSA Note on Fiduciary Responsibilities of the Corporate Director

MYSA Note on Fiduciary Responsibilities of the Corporate Director

By Bob Poretti
MYSA President
I recently returned from the US Youth Soccer Workshop. One of the sessions I attended was a presentation on the fiduciary responsibilities of a corporate director. Since almost all of our member clubs are corporations, I am taking this opportunity to share some of the highlights of the presentation.

Who are directors? Directors are individuals who have been elected to positions identified as directors in the bylaws of the corporation. They are not self-appointed, but hold the position based on the processes spelled out in the bylaws. The board of directors is the governing body of the corporation. The directors are responsible for making decisions for the corporation. As a matter of law, a director has a fiduciary duty to the corporation. These duties cannot be waived or delegated. The requirement of being a fiduciary is that he or she MUST put the interest of another — the beneficiary — over the interests of all others, including the fiduciary’s self-interest.

The club is the beneficiary and all decisions and actions by a director must be done in the best interests of the club. An example was given in the presentation of a director (named Fred) who knew he could negotiate a 20-percent discount on uniforms. The question was, could Fred than turn around and sell the uniforms to his club at a 10 percent discount? The club would be getting a 10-percent discount and Fred would be making a 10-percent profit.

Because Fred is a fiduciary of the club, he must put the club’s interests before his own. He would be violating his fiduciary duty by not passing the entire 20-percent discount on to the club. He is not allowed to make a personal profit because of his position as a director. Another part of a director’s fiduciary duty is a duty of loyalty to the organization. He or she must identify any conflicts of interest or perceived conflicts of interest that may come up and recuse themselves from the decision making process. It was recommended that each club have written conflict-of-interest rules in place.

A director has a duty of candor. He or she must disclose to the corporation any information they may have that has significance to the corporation. For example, if Mary learns that Fred (same Fred) has rigged the club tryouts to make sure that his child plays on the top team, Mary has a duty to disclose this information. It doesn’t matter if Fred’s child is the best player and deserves the spot or not. The fact that Fred rigged the tryouts must be disclosed. 

A director has a duty of confidentiality. They are not free to disclose anything that is not publicly known, a matter of public record, or not common knowledge. This includes board discussions and votes, even if they took place in an open meeting. The most important duty a director has is the duty of care. A director must at all times act in good faith, act in a manner that they believe to be in the corporation’s best interest and act in a manner that a reasonable person would in the same circumstances