The Fiduciary and the Elected Member

Do Elected Members hold a fiduciary duty?  If so, to whom?

I have held Board positions, and as a member of the Australian Institute of Company Directors, I have completed the Company Directors course which covers these duties in detail.  It is my view that Elected Members hold a fiduciary duty to the public that elected them, and to whom they serve.

Why is this important?  I have been advised that as a Councillor that I owe a fiduciary duty to the Local Government “first and foremost”.   While this relationship may exist, its priority over that of the Community is worthy of debate.

So, let’s first consider what a fiduciary is.  For company directors, the Corporations Act 2001 defines four basic directors’ duties, these are:

  1. Care and diligence
  2. Good faith
  3. Not to improperly use position; and
  4. Not to improperly use information

Specifically, Good Faith is a duty that requires a director to act in good faith in the best interests of the company and for a proper purpose, including to avoid conflicts of interest, and to reveal and manage conflicts if they arise. This is a duty of fidelity and trust, known as a ‘fiduciary duty’, it is imposed by common law and a duty required in the Corporations Act.

Examples of fiduciary/ beneficiary relationships include those of the corporate director/ shareholder, attorney/ client, trustee/ trust beneficiary, executor/ heir, and principal/ agent.  So how could this apply to Elected Members?

A fiduciary is one delegated with an authority to act, and to act on the beneficiaries’ behalf.  To exercise discretion over the assets or interests.  The fiduciary is in a superior position to the beneficiary by the nature of their role, their authority to make decisions and their access to information.  The beneficiary trusts that the fiduciary will act in the beneficiary’s best interests.

Sound familiar?

Citing these responsibilities, if the Elected Member is to be considered a fiduciary, then surely the beneficiary in this relationship is the community that elected them, and to whom they serve.

Therefore, the fiduciary relationship would be between the Elected Member and the Community – first and foremost.

Any assertion that the Elected Member would have a fiduciary duty to a Council or a local government that is superior to their relationship with the community should be challenged.  Why would we have elections if the primary duty of those Elected is then transferred to another?

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