Director of a company is liable for which of the following? a. Employee fraud b. Misuse of funds by executives c. Loss of goods Both b & c Only c Both a & b Only b
Answer (1)
In the business context, a director of a company holds a position of responsibility and is expected to act in the best interest of the company. The liabilities of a director can vary widely depending on the specific circumstances and jurisdiction. Let's explore each of the options provided:
Employee fraud: Typically, directors are not held directly liable for fraudulent acts committed by employees, unless they were aware of such actions and failed to act appropriately or were complicit in enabling such conduct by neglect or direct involvement.
Misuse of funds by executives: Directors can be held liable if they negligently or knowingly allowed the misuse of company funds. This is especially true if the director failed to exercise due diligence in their oversight duties, which is a core responsibility of their role.
Loss of goods: Directors typically are not directly liable for the loss of goods. Such issues usually fall under operational risks managed by specific departments within a company. However, if the loss results from failure in oversight duties, such as inadequate controls or policies that the directors should have implemented, there might be some accountability.
Considering the choices provided:
Both b (Misuse of funds by executives) and c (Loss of goods) could potentially place liability on directors, particularly in cases of a failure in duty or oversight.
Hence, the most appropriate choice is: Both b & c.
In summary, directors have a fiduciary responsibility to ensure that the company is administered properly. While fraud by employees may not directly implicate directors unless they were negligent in their oversight duties, the misuse of funds and potential losses due to negligence in oversight could certainly render directors liable.
