Directors of organizations and other non profit corporations have fiduciary duty of loyalty to the organization. This duty generally requires that any transactions between the board and its directors be;
Fully disclosed,
Approved by the board without the vote of the interested director
Fair and reasonable to the organization.
Imagesource
In most cases, a director breaches the duty of loyalty only through some secrets or undisclosed interest in a transaction with the transaction with the organization.
To illustrate, directors who own a business (such as insurance, real estate, furnishing) may violate the duty of loyalty by asking the board to enter transactions with their business without fully disclosing to the board their personal interests in the transaction. Additionally, such"interested " directors ordinarily should abstain from voting on the transaction, and the transaction should be fair and reasonable to the organization.
Officers and directors of organizations must understand they have been placed in a position of special trust and must rigorously pursue the best interests of the organization and avoid any action or decision based of self-interest.
