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N Cal Attorney
N Cal Attorney, Attorney
Category: Business Law
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Experience:  Since 1983
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Hello. This is for corporations experts. As I understand it,

Resolved Question:

Hello. This is for corporations experts. As I understand it, corporate directors owe fiduciary duties to their creditors and shareholders but not to their employees i.e bankruptcy, etc. But are there jurisdictions around the world that corporate directores owe fiduciary duties to their employees. Does the US or Europe enable such a regime where fiduciary duties are owed by corporate directors to their employees? Thank you.
Submitted: 6 years ago.
Category: Business Law
Expert:  N Cal Attorney replied 6 years ago.
At least to the extent that directors are responsible for safeguarding and managing employees' retirement funds, they do owe fiduciary duties to the employees of the corporation.

Also, in bankruptcy, wage claims of employees have priority over most other claims including claims by shareholders.
Customer: replied 6 years ago.
Hi N Cal. Is this the norm in the US? Or are there other countries that allow this. Can you explain a little bit more about the retirement funds and the wage claims please. It seems that the fiduciary duties owed to the employees are limited to an extent.
Expert:  N Cal Attorney replied 6 years ago.
They are limited.

Directors who become trustees of a pension fund take on fiduciary duties as a result of the pension fund but in their capacity as directors they have very few duties to employees. A duty not to recklessly endanger their employees health and safety but that is not really a fiduciary duty, it's a legal duty of all employers whether or not the employer is a corporation.

I believe almost every jurisdiction gives wage claims a very high priority in bankruptcy court. Of course the claims for payment by the lawyers of the bankrupt are even higher priority... But workers wage claims have higher priority than claims by shareholders and unsecured creditors.
Customer: replied 6 years ago.

Hmmm I am wondering why it is so limited. Is it purely monetary from the perspective of the director or to safeguard their own backs. Fiduciary duties are not legal per se really are they - they are more geared towards ethical, good faith or trust considerations - i.e. benefitting monetarily or making investment decisions that run against the interests of the corporation - or is there a blurred line.

 

You mention that a duty not to put the worker in an unsafe environment is more a legal duty - i am wondering if there is another aspect to this - it sound more like a moral and ethical obligation - so I wondering why it is not under the umbrella of a fiduciary duty?

 

With the wage claims, the director of the corporation is in essence a trustee for the employee so that director cannot spend or do away with those funds without the approval of the employees? Is this correct?

Expert:  N Cal Attorney replied 6 years ago.

With the wage claims, the director of the corporation is in essence a trustee for the employee so that director cannot spend or do away with those funds without the approval of the employees? Is this correct?

Yes, as soon as someone holds money for someone else, they become a trustee and trustees have fiduciary duties.

 

Fiduciary duty varies quite a bit among different jurisdictions, see

http://en.wikipedia.org/wiki/Fiduciary#Duty_in_different_jurisdictions

 

There is a fairly long summary on this posted at

http://cyber.law.harvard.edu/trusting/unit5all.html



Edited by N Cal Attorney on 5/5/2010 at 10:43 AM EST
Customer: replied 6 years ago.
So it appears that directors only owed employees in a limited sense - concerning wages, pensions only and not to do anything that conflict with this? Shouldn't it be more expansive?
Expert:  N Cal Attorney replied 6 years ago.
I agree that it should be but I don't make the laws.

I believe corporations should bear a fiduciary duty to the public at large not to destroy the environment and not to make obscene profits, but that is not the law.

Usually fiduciary duties are only imposed as a result of a trust or a confidential relationship or an agency relationship.

http://www.bowne.com/securitiesconnect/details.asp?storyID=1515
has an article that states
California puts it in writing. When delineating fiduciary duties in corporations, Delaware prefers a common-law approach, letting substantive rules evolve from case law, whereas California chooses to embed the basic concepts in Section 309(a) of its Corporation Code.

Section 309 is posted at
http://leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=00001-01000&file=300-318
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Customer: replied 6 years ago.
Thank you.
Expert:  N Cal Attorney replied 6 years ago.
Thank you for accepting my answer.