One of the main features, on the basis of which our law differs from the American one, is the relationship to business and administrative institutions. In America there are deep traditions of business protection and administrative institutions of power. Americans created a number of obligations on the part of the leaders of these organizations in relation to the organization itself and its owners. Here are some of them: 1. Obligation to show full care; 2. Obligation to show loyalty; 3. Obligation to disclose conflicts of interest; and others.
The obligation to show full care – is an integral part of any managerial activity. As it is known, the leader represents the interests of the organization and speaks on its behalf. In such a situation, it becomes obvious the need to show special care and attention to the organization that transferred this right to the manager. In America, the head of the organization and the organization itself are different people and different legal entities. They are divided both horizontally and vertically. That’s why the Americans established the obligation for any leader to act in the interests of the organization in the same way as any other same director would act in a similar situation. Sometimes they apply the standard of a foreign observer, but it is more suitable for determining the rationality of decision-making than for assessing the level of concern.
Any executive has a duty of loyalty to his organization, which entrusted him to represent its interests. The manager must always put the interests of the organization higher than his personal interests. He is always obliged to reveal and report conflict of interests. It is considered that the manager has a conflict of interest in all cases when the organization enters into relationships with members of his family. Any financial interest of members of the manager’s family, received on behalf of the organization he represents, violates the principle of loyalty. All contracts concluded between the organization and the manager in its interests are considered invalid and have no legal force. The second problem is the usurpation of power or the extraction of benefits from the opportunities created by the organization. As you know, the organization as a rule exists for an indefinite period and has theoretically unlimited possibilities. If the manager of the enterprise, who is usually temporary, uses the goods created by the enterprise, or appropriates them in personal interests, then such actions are considered a breach of loyalty. The same problem arises when the manager of the enterprise begins to compete with his enterprise on the same market.
The obligation to disclose relevant information is the next important element of legal representation. The director is obliged to disclose all relevant information known to him, which concerns the interests of the enterprise. As it is known, the company needs to make different kinds of decisions. In other words, the decision taken must be informed and based on all and the full information that is necessary for making such a decision. The director must disclose all relevant information to both his founders, owners and all officers who have the right to make decisions and manage the company.
As you can see from the description above, if at least one of these parts was applied in our CIS countries, then our enterprises and organizations would have prospered, and the fight against corruption and abuses would have been much more successful.
Roman Zadoinov, Attorney at Law.