CEO’s duties
Company CEOs oversee all regular operations of a company. They have legal duties, expectations, and responsibilities to the organization, and failure to uphold these responsibilities result in lawsuits from shareholders and debt liabilities for the organizations. CEO’s duties bind the cooperation legal proceedings, contracts, and debt obligations. Therefore, the CEO’s have the fiduciary duty of care to the cooperation. They are expected to act in good faith and the best interest of the cooperation. The duty of care broadly applies to all decisions CEO’s make, and even the decisions they ought to make, are they to exercise ordinary care or extreme care. The duty of care requires the CEO to understand and evaluate the organization’s operations and agreements.
First, the directors have the responsibility of monitoring and overseeing the organization’s business. They have the responsibility to act reasonably when delegating duties to others and when choosing delegates. For effective monitoring, the CEO should create systems that record and process information about its operations and financial position. These systems vary widely, and their suitability depends on the business of the organization. In the Caremark case, the court assessed the appropriateness of an agreement of the case. It concluded that the corporate directors were responsible for ensuring that appropriate policies, systems, and procedures were designed to give the board of directors and management time and required information regarding compliance, internal controls, risk management (Peck et al., 226). Overall, directors are responsible for ensuring a system in place for easy oversight and monitoring.
Directors have a duty of care when making decisions; this duty requires directors to be fully informed when making decisions. The reliability of the information depends on the availability of time and the cost of acquiring the information. Acquiring information is never cheap, especially when it involves consulting professionals like lawyers, accountants, and consultants. The law does not hold directors liable for decisions made without conflict of interest since the CEO has a primary role in maximizing profits. Therefore risky decisions may be viewed as decisions to enable the company to develop further and maximize shareholders’ profits (Bit et al. 556). Because primary main duty of a CEO is to manage the organization, it would be considered that the risky decision was were made for the benefit of the organization. Therefore when analyzing directors’ decisions, the court has to check if the CEO had the primary goal of maximizing shareholders’ profit.
The directors should inquire about the reliability of information before making decisions. Otherwise, the court may presume that; the director had a personal interest when making financial decisions, the CEO was not independent, did not gather the required information, and did not exercise the duty of care. The CEO needs to show that his conduct was entirely fair. In a court case of directors of WorldCom. This telecommunication company’s bankruptcy case was the largest in history. The directors had to pay 20 million dollars from their pockets to the company (Peck et al., 222). Directors ought to be careful when making decisions because they can be held liable.
In conclusion, the duty of care requires the CEO to understand and evaluate its operations and agreements. It requires the CEO to live up to a certain level of care to the company. Besides, they need to make decisions that are financially, ethically, and legally right. Moreover, they have to ask questions when acquiring information, whether with lawyers, accountants, consultants, or other professionals, to make the best decisions in the interest of shareholders, and not break the law. Considering the above, Judges should not penalize directors who make honest mistakes, thinking that it is for the shareholders’ best interest, and the decisions are supposed to maximize profit for the organization.