The Cost of Infidelity
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Newt Gingrich has been a fixture in the news cycle for a while now. It seems he’s doing that “will-he-or-won’t-he” run for President dance. One the news shows recently, he had to confront the issue of infidelity. The former Georgia Congressman has been married three times and has often been criticized for the less-than-clean transitions between those marriages.
The former Speaker’s latest round of Sunday morning interviews got me thinking about the cost of infidelity – not just in a presidential run, or even in divorce court, but rather as seen every day in my business practice.
You see, when a person commits to a company – as an officer, director, or even sometimes as an employee under contract, the law and various contracts impose duties; the higher the post in the company, the greater the duty. Chief among those duties is the duty of loyalty. Called different things in different states, the result is the same – you breach it at your own peril.
In life, there are always temptations. In business, that temptation takes the form of the desire to take more (or all) of a good deal for oneself rather than sharing the proceeds with others. Sometimes, the thought occurs with the possibility of landing a large, new contract or upon hearing of a tremendous sales opportunity.
“Maybe,” the thought goes, “I could set this one up outside the company and triple what I would otherwise get in commission or draw.”
Possibly.
Sometimes, to be sure.
But what of those left on the outside looking in?
Simply put, they can sue. They can go after, and often take, those appealing, better-than-expected profits. In Maryland, one of the causes of action is known as a “breach of corporate opportunity.” This means, in effect, that one may be held liable for the improper taking (some would say “theft”) of a business opportunity that rightfully belonged to the company.
Let’s assume that Susan Smith was a shareholder and vice president of ABC Janitorial Corporation. Upon seeing an opportunity for a large contract on the horizon, Susan set up a new company with her husband called DEF Cleaning. DEF then snared the contract for itself. In so doing, it wrongfully claimed one of ABC’s opportunities for itself. In other words, it took money that ABC could have earned. It is a safe bet that Susan’s former employer is not going to go quietly into that good night. They will hold Susan accountable.
In so doing, the law (as is not always the case) tracks ethics.
The long and short of it is that Susan, as a co-owner and officer of ABC, owed ABC something better than just her full-time, physical presence. She owed ABC her loyalty. When she decided to deprive ABC of an opportunity that rightfully belonged to it, she committed the corporate equivalent of adultery.
And in business, just like in marriage, there is usually a price to pay.
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