Directors Who Betray Their Companies Will Pay a High Price

The prestige that comes with being invited to join a company's board of directors might be hard to resist, but you should never accept such a role unless you are prepared to serve with 100 percent loyalty to the firm.

- Tan Ooi Boon

This is because the law prohibits directors from placing their own interests above those of the company, and there is a high price to be paid for breaches of that duty.

"This fiduciary obligation of loyalty is an inflexible one that persists even after the director's resignation," the High Court ruled in a recent case involving a director who diverted business deals to himself.

This simply means that it is mandatory for directors to be faithful to their companies. If a director has used his position to benefit himself, justice demands that he "disgorges" every dollar of his profit.

This rule was amply highlighted by the High Court in 2022 when it ordered a director who diverted a property development deal to himself to pay $87 million to his former company.

The penalty was unusually high because this was the gain the director would have reaped by taking on a project involving 82 semi-detached homes that was being negotiated by his former company.

He was its 50 percent shareholder at the time but, instead of sealing the deal, he set up his own company and secured the project.