Also known as: improper personal benefits · personal benefit
Written by attorneys · grounded in primary & secondary sources — see below
A personal advantage or gain obtained by a fiduciary such as a corporate director or officer from a transaction involving the entity served. The benefit is improper when it arises from self-dealing that conflicts with the fiduciary's duty of loyalty or good faith and is not disclosed or approved by disinterested parties.
Ike Ingram formed separate corporations for each of his taxicabs, each holding only the minimum insurance required by law. When one cab injured a pedestrian, the victim sought to hold Ingram personally liable by piercing the veil. The court refused because the separate incorporation alone did not show that Ingram used the corporate form to obtain an improper personal benefit or to defraud creditors.
Iris Irons held a power to destroy a future interest at any time for her sole advantage. When measuring the perpetuities period, the time during which she could exercise that power for her exclusive personal benefit was excluded from the calculation, preserving the validity of the limitation.
Select any source to read its text and confirm it supports the definition.
A reporter at a financial newspaper passed advance information about his column to confederates who traded on it. The scheme produced profits shared among the participants. The reporter's receipt of a share of those trading gains constituted an improper personal benefit that supported the fraud conviction.
A printer learned the identities of takeover targets while preparing announcements for clients. He traded on that information for his own account. Because he had no duty to the target companies, his trading profits were not an improper personal benefit that violated insider-trading rules.
Directors of a target company favored one bidder after receiving side assurances of continued employment and bonuses. The Delaware court found that the directors had pursued an improper personal benefit that tainted the auction and breached their fiduciary duties.
Corporate officers sold shares on the basis of inside information about an impending dividend cut. The court held that the officers' trading profits were an improper personal benefit obtained through misuse of corporate information, supporting a derivative claim for breach of fiduciary duty.
An improper personal benefit requires that the fiduciary actually obtain a tangible or intangible gain from the transaction. A conflict of interest exists whenever the fiduciary's personal interests diverge from those of the corporation, but liability for breach typically turns on whether the fiduciary secured the improper benefit without proper disclosure and approval.
No. Liability arises only when the benefit is improper because it was obtained through self-dealing that breaches the duty of loyalty or good faith. Benefits that are fully disclosed and approved by disinterested directors or shareholders ordinarily do not trigger liability.
Yes. An agent must act in good faith for the principal's benefit. When the agent secretly arranges for a personal job or other advantage from a third party in exchange for exercising the power, the undisclosed benefit violates the duty of good faith even if the underlying transaction benefits the principal financially.
…virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived therefrom.” Diamond v. Oreamuno , 24 N. Y. 2d 494, 497, 248 N. E. 2d 910, 912 (1969); see also Restatement (Second) of Agency…