Fiduciary

A fiduciary holds a position of trust. Because they manage something on someone else’s behalf, the law expects them to put that party’s interest first. In general terms, fiduciary duties include a duty of loyalty (not putting one’s own interest ahead of the party they serve) and a duty of care (acting with reasonable diligence and judgement). The exact duties depend on the role and the law that applies.

Common fiduciary roles include trustees, executors, company directors, and some financial advisors and plan administrators.

Several people around a family company may be fiduciaries at once. Members of the board of directors owe duties to the company and its shareholders. A trustee holding family shares in a trust owes duties to the beneficiaries. If the company has an ESOP, its trustee owes duties to the plan’s participants.

The tension in a family business is that the same person may be a parent, a director and a trustee. A family member on the board owes duties to the company and all its shareholders, not only to their own branch of the family, even when a decision feels personal. A conflict of interest policy helps make these situations visible.

A common confusion

Loyalty to the family and fiduciary duty are not the same thing. Sometimes they point the same way. Sometimes, for example when a family member wants a job or a contract, they do not.

Why it matters for the successor

A successor who joins the board takes on these duties in their own right. Understanding them changes how they speak in the boardroom: as someone responsible for the company, not as the founder’s child representing the family view. The article on an independent board before succession covers how boards change around a transition.

This is a general definition only. The family should involve its lawyer to understand the specific duties attached to each role.