Shareholders harmed by officers who act on behalf of their own self-interests instead of the company may have breached a duty of care. As explained by the American Bar Association, if it results in financial losses for the corporation’s stockholders, you may seek relief through a legal action.
In some cases, an executive owns or manages a secondary business while serving as an officer of a primary company. A personal conflict of interest may exist if an officer uses his or her position to make decisions that benefit the other business.
What type of relief may a legal action bring?
New Jersey and federal laws allow shareholders to file lawsuits against officers for lost profits caused by a breach of duty. You may need to provide evidence that a lack of care or due diligence in an officer’s decision-making process caused your loss.
If the court finds your argument substantial, you may receive compensation for out-of-pocket expenses in addition to a loss of profits. When stockholders experience severe harm, such as an executive presenting falsified financial documents, the court may award additional damages as a way to penalize the officer.
How may I learn if a company released false financial statements?
With a legal action, you may request that the court order an officer to turn over documents used to make a decision. Accounting records, receipts and contracts that interconnect with an officer’s other business interests may come to light.
When shown that business decisions favored another company at the expense of corporate shareholders, it may qualify as an officer’s breach of fiduciary duty. Depending on how much an officer profited from the breach, stockholders may seek compensation for their loss.