Executives helping run organizations have fiduciary duties to those businesses. The law requires that they put the best interests of the organization above their own preferences.
Shareholders, business partners and other interested parties sometimes need to take legal action when it becomes clear that executives breached their fiduciary duty to a business. Breaches can sometimes be the result of negligence. Other times, they may involve embezzlement, which is clearly intentional.
In some cases, business leaders engage in self-dealing, which can cause significant financial damage to the organization.
What is self-dealing?
Self-dealing is a means of ensuring personal enrichment, often at the cost of an organization. One party puts their own financial benefit above what is best for the company they help run.
A leader might engage in self-dealing by hiring their spouse’s small business to provide services for an organization. They may charge an inflated rate rather than a reasonable market rate for those services. Other times, they may agree to sign contracts with outside parties that promise to provide a finder’s fee or a similar form of kickback.
Decisions about business transactions should prioritize what is best for the company, not what enriches individual leaders. Self-dealing causes damage by unnecessarily increasing operational costs. It can be a way to obfuscate prioritizing personal financial gain over the financial stability and profitability of an organization.
Proof of self-dealing could justify business litigation intended to remove an executive or even force them to repay the funds they secured from the organization through their misconduct. Reviewing conduct that may have violated an executive’s fiduciary duty with a skilled legal team can help shareholders and other concerned parties demand accountability from those tasked with operating an organization.