Ben & Jerry’s Director In Trouble For Self-Dealing
We have written in the past about the various ways that officers and directors of a company can get themselves in trouble. Often, this includes breaches of fiduciary duties. Certainly, the mere fact there was a bad business decision, or that the company doesn’t do well, does not mean an officer or director is liable, or that he or she did something wrong.
But there is one category of wrong which will almost always get someone in trouble: Self-dealing. As the name implies, self-dealing involves using your position, or company assets, to benefit something or yourself, personally.
Ben & Jerry’s Member Accused of Self Dealing
Ice cream maker Ben & Jerry’s is learning about self dealing the hard way. Recently, the head of the company’s board of directors was accused of using corporate moneys to help her own pro-Palestinian nonprofit organization. The allegations were revealed in a complaint made to the IRS.
Ben & Jerry’s does have a nonprofit foundation. According to the Complaint, the nonprofit spent about $100,000 to a group that studies land reform. The Ben & Jerry’s board president is the only employee on salary for the nonprofit organization according to the filings. Other funds from the nonprofit went towards Palestinian refugee rights.
The lesson here has nothing to do with Palestine or middle east relations. It has to do with making sure that you are not misapplying company funds, and understanding that officers or heads of boards of directors are not autonomous.
Decisions made by corporate officers or directors, must have some benefit for the company. Officers and directors need to separate themselves, and their own interests, from company interests.
Self dealing can come in other ways as well. Imagine the following:
- A corporate executive hiring his son’s construction company to do major construction work for the business
- The president of a marketing company requiring employees to work on the president’s own, personal marketing campaigns
- A Vice President, knowing that he will be leaving the company soon to start a competing business, purposely wasting company resources to weaken the company
- An officer who takes advantage of a company’s bulk-pricing contract, to secure reduced priced items for himself and his family.
If a director does want to engage in a transaction that could be seen as self dealing, the transaction or activity must be disclosed to the company. The transaction must be approved by any neutral board members—that is, members who don’t also have some interest in the proposed transaction, and who have not been influenced in any way to vote one way or another.
Note that this exception only applies to members of a board of directors—not to corporate officers.
If you have doubt whether a proposed action may be considered self-dealing, it is best to ask a business attorney, and disclose the proposed transaction or activity to the company’s board of directors.
Question about business decisions? We can help. Call the West Palm Beach business litigation lawyers at Pike & Lustig to answer your business law questions.