A self-dealing transaction in one in which a director enters into on behalf of the corporation that directly or indirectly benefits the director personally. For example, let us assume that the director represents a corporation that operates hotels. The hotel chain is looking to contract with a laundry company to clean the hotel’s linens. The director of the hotel company enters into a contract on behalf of the hotel with the director’s own laundry company at a price that is twice the cost of other laundry companies for the same services. In this situation, the director of the hotel company engaged in self-dealing because he entered into a contract on behalf of the hotel in order to unfairly benefit his own personal interests.;
, A conflict of interest arises when the director of a corporation has an interest in both the corporation and some entity that the corporation is dealing with. This can take the form of the director being a shareholder of another company that the corporation is dealing with, the director having a competing business, or the director’s close family member standing to benefit from a contract that corporation intends to enter into.
If a director has a conflict of interest, he or she must disclose that conflict of interest to the board. Failure to disclose the conflict is a breach of the duty of loyalty. Simply having a conflict of interest does not preclude a director from serving on a board. The board should, however, limit that director’s involvement with the decision making on those matters in which the conflict arises. If the director must be involved in the decision-making of a deal in which he or she has a conflict of interest, other independent board members should sign off on the deal as well.
 If an opportunity presents itself to a director or officer of a corporation that may be an opportunity for the corporation, the director or officer must present that opportunity to the corporation. The officer must not take the corporate opportunity for himself or herself to the detriment of the corporation. There is a high penalty placed upon the director for doing so: all the profits from the “stolen” transaction will be taken from the director and given to the corporation. An example of a violation of the corporate opportunity is if a director learns of the sale of a certain piece of property that could be of substantial value. If the company the director works for deals with real estate of the type that the director learns about, and the director purchases the property anyway, the director violated his or her fiduciary duties owed to the company.
Avoid self-dealing.
Avoid conflicts of interest.
Avoid taking an opportunity away from the corporation.
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