Fiduciary Responsibilities of Managers

Fiduciary Relationships

Some of the most important ethical responsibilities of managers derive from the fact that they occupy a fiduciary position.
The central cases of fiduciary relationships occur when all the following elements are present:
a) somebody has been entrusted with powers, opportunities or assets;
b) these powers, opportunities or assets have not been given to him for his own advantage but for the benefit of others; and
c) it is especially difficult to ascertain how conscientiously those responsibilities have been discharged. An example is that of the trustee who is given property to administer for the benefit of a beneficiary.

Another is that of a Government Minister who is given a large number of discretionary powers which he is supposed to exercise, not on the basis of what is most beneficial to himself, but according to the demands of the common good.
In the rest of this note we will discuss more specifically the most important fiduciary
duties of managers. It should be appreciated, however, that one’s fiduciary
responsibilities cannot be neatly enumerated. It is above all a question of realising that by accepting a position of trust one undertakes to act in a trustworthy manner, especially when one’s own interest comes into conflict in any way with the responsibilities of one’s position.

Conflicts of Interest

Perhaps a simple example will be of help in clarifying the concept of conflict of interest. The Services Manager of a bank has to sell a one-year old Peugeot 505 car which is no longer needed by the bank. Part of his responsibility in this task is deciding the price that the bank will accept for the car.

As he needs a vehicle, he decides to buy himself, in his personal capacity, the car that the bank is selling. In this situation there is clearly a conflict between the responsibility of the manager in his capacity as Services Manager of the bank (i.e., to get the highest price reasonably obtainable for the car), and his personal interest (to buy the car at the cheapest possible price).
While most of the situations which arise in real life are not as helpfully obvious as the example just considered, it is the presence of the conflict between personal interest and Fiduciary Responsibilities of Managers

Official responsibility which creates the ethical problem that is referred to as a conflict of
interest.
A person placed in such a situation could take advantage of it to obtain a car at a much lower price than would obtain in an arms-length situation. Very few people are likely to entertain doubts about the ethical quality of such an action; it constitutes a clear-cut case of abuse of fiduciary powers and a close equivalent to a situation of outright theft.
However, the mere fact that the manager finds himself in such a position already places him in a situation of potential conflict of interest, even if in fact he were to bend over backwards in order to avoid taking advantage of the situation and paid above the market value of the car. As we will see, there are strong reasons to avoid being placed in such
situations of potential conflict.

Even when you are telling the truth, you will still raise a lot of doubt, because your credibility will be questioned.