A Duty of Care is a legal duty that essentially means the an officer or director has to act reasonably careful when acting on behalf of the organization. However, it’s a lot deeper than that. The Duty of Care is typically paired with the Duty of Loyalty.
Legal Duties
Firstly, a legal duty is different from a job responsibility. If you breach a job responsibility, you typically get reprimanded at worst. However, legal duties have a lot more force behind them.
For example, if you work at a supermarket, they might fire you if you forget to clean up a spill. However, if you own the store, you owed a duty to the customer who can sue you if they slip and fall. Stores owe a legal duty to customers to clean up hazards. If damage results from a breach of that duty, that’s negligence.
Duty of Care
A duty of care is similar to the duty owed to customers above. However, the officers and directors instead owe the duty to the organization itself. Additionally, their duty is different than simply keeping a safe floor.
In North Carolina, this duty essentially states that a fiduciary has to act in good faith using the same or greater care of a prudent person in the same position. There is actually a lot of subjective portions of that duty. What is good faith? Who is the prudent person you’d be compared to?
Here’s my rule that will help you fulfill this duty.
First, if you’re familiar with the subject matter, industry, or portion of the business you’re deciding on, act as you would while looking out for the organization. For example, if you’re an accountant, you’re safe to make decisions regarding the budget using your own professional knowledge.
Otherwise, rely on the advice of experts in that area. If you ever find yourself not understanding something clearly, you should seek the advice of experts.
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