corporate-law security securities
Could an executive selling shares be considered a breach of fiduciary duty?
<p>When major executives sell large numbers of shares, these sales are often very public. Generally, massive stock dumps are a sign that the executive feels the value of the company has peaked, and is likely to drop. In other words, every large sale of stock is implicitly a public announcement of lack of confidence in the company by the executive.</p>

<p>Legally, executives have a fiduciary duty to their companies, in that they are expected not to take actions harming the company and its value in any major way. Considering a large sale of stock by a company executive tends to lower public confidence in a company, and thus lower the value of the company, could such a sale itself be considered a breach of fiduciary duty?</p>

<p>Legally, executives <strong>do not</strong> have a fiduciary duty to their company - they are employees and this does not create a fiduciary relationship. However, directors <strong>do</strong> have a fiduciary duty so I will assume that is what you mean.</p>

<p>This duty is to the <strong>company</strong> - it is not to the shareholders individually or collectively. The market capitalisation of the company affects the shareholders, it does not affect the company in normal circumstances except indirectly. Of course, if the company is or is planning to raise or lower capital through debt or equity markets it may have a direct effect.</p>

<p>So long as their trading does not adversely affect the company they can do what they like.</p>
