Fiduciary duties are often discussed in regards to large corporations, such as those headquartered in Las Vegas. According to excerpts on the topic, provided by the website for Harvard University’s Berkman Center for Internet and Society, fiduciary duties are created when a service relationship is established between a fiduciary and an entrustor, in which the fiduciary essentially acts on the entrustor’s behalf in certain situations. The level of authority that a fiduciary holds can vary greatly.
Because these relationships place the entrustor at the mercy of the fiduciary, certain duties are imposed to ensure that the fiduciary does not abuse this trust. There are two general types of fiduciary duties. The first is the duty of loyalty, and the second is the duty of care. The former requires that the fiduciary have no conflict of interest when acting on behalf of the entrustor. The latter is often likened to negligence standards because it requires the fiduciary to behave with reasonable care when representing the entrustor.
Fiduciary relationships exist in a number of business situations. For example, corporate officers, boards of directors, agents, co-venturers and partners are all considered fiduciaries who can be held legally liable should they ever breach their duties.
Although held liable if they ever breach their duties of loyalty or care, fiduciaries also reap some benefits from these legal requirements. For example, the imposition of these duties increases fiduciaries’ marketability, as it is a safeguard against abuse of power. Because of the assurance that legal remedies are available should fiduciaries ever behave inappropriately, entrustors are more willing to enter into business relationships with them.