A new fiduciary rule has been issued by the SEC to the public. The rule, known as Rule X, is designed to ensure that people, including officers and directors, are aware of their fiduciary duty to their fellow investors. It requires that officers, directors, and employees who hold positions as a fiduciary to the corporation have complete knowledge of their duty to the company. This is in addition to the responsibility to manage the assets of the company in a prudent and reasonable manner.
The rules are meant to make sure that the fiduciary is aware of their fiduciary duties to the corporation. The SEC is also intended to ensure that the president of the corporation also has full knowledge of his fiduciary duties to the corporation.
The fiduciary who’s the CEO of the corporation should have full knowledge of his responsibilities to the corporation. This is a bit like a secretary in a daycare. She doesn’t do anything, but only leaves some things in the office that she’s supposed to do. She also doesn’t leave the office to do anything at all. This isn’t the sort of thing the SEC has in place, but it’s a really important rule.
The reason for this rule is that, at the core of the company’s fiduciary duty is the ability to find the best way to make a business case. The problem with this rule is that it allows the corporation to do more, and better, things. It’s not as if only one corporation can do exactly the things the SEC has in place and the corporate party is the one doing the best.
Thats true, but its not really a rule. It is a principle that you should always have a best way of doing something. For instance, lets say that a company can only fire the CEO if the CEO is actively involved in the decision making process. That is a good thing, and a rule, as long as it doesnt require an active decision making process. But it is a principle that you should always have a best way of making a business case.
So, a better way to do an employee stock options (ESOs) is: You have to hire a lawyer.
And the lawyer says, “Hey, my client is going to pay for that, but you can’t do that. You can hire someone else to do it.” And now you have to hire a lawyer.
A fiduciary has a duty to act only for the best interests of the company’s stockholders. This means that a fiduciary does not have to share personal interests with his or her company’s shareholders. This is why the CEO of a company with an ESOP, for example, has no obligation to act in the best interest of the company’s stockholders.
But now a fiduciary has to hire a lawyer. And the lawyer says, Hey, my client has an ESOP and we’re not in this for the stockholders. We’re in this for ourselves. So we have to hire a lawyer. A second fiduciary, a third fiduciary, and so on. And the lawyer says, This is insane. There is already a law against this, and it’s called the fiduciary rule.
