Officer Liability and Responsibilities

Officer Liability and Responsibilities

The officers of a corporation are appointed by a corporation’s board of directors and conduct the duties as required by the corporation’s bylaws. Officers are fiduciaries and owe the corporation certain duties.

Obedience. The duty of obedience requires an officer to act within his or her authority.

Diligence. The duty of diligence requires an officer to act with the same degree of care and prudence that a person under similar circumstances would act.

Loyalty. Officers also owe a duty of loyalty to the corporation and its shareholders. A duty of loyalty requires officers to subordinate their own self-interest to the interests of the corporation and shareholders. It requires officers to be constantly loyal to the corporation that they serve and control. 

If officers fail to meet any of these duties, officers may be liable for the resulting damages. Other liabilities arise if the officer engages in bad faith or negligent or criminal conduct. 

However, officers are not liable for honest mistakes of judgment under the business judgment rule. This rule limits judicial review of corporate decision-making when corporate officers make business decisions on an informed basis, in good faith, and in the honest belief that the action taken is in the best interests of the company.

For questions, contact the business lawyers at Murphy Desmond S.C. to help establish bylaws and officer duties for your company.