Fiduciary Duties Are Not Optional: How Good Governance Protects Your Company (and You)
This month, Valley Business & Tech Law celebrates its second anniversary. While that milestone means a lot to me personally, it also reflects a much longer journey—over a decade of working with founders, executives, and boards to navigate what may be the most underestimated area of business leadership: corporate governance.
If there’s one message I want every business leader to take seriously, it’s this:
Fiduciary duties aren’t suggestions. They are affirmative legal obligations with real consequences.
And no, not knowing the rules isn’t a defense.
What Are Fiduciary Duties?
If you’re a company officer, director, or managing member, you are entrusted with power—and the law imposes responsibilities that match that power.
Two of the most critical duties are:
- Duty of Care: You are expected to make informed, thoughtful, and prudent decisions. That includes preparing for meetings, reviewing materials, participating in discussions, asking hard questions, and voting when required. You can’t sit back and let decisions "just happen."
- Duty of Loyalty: You must put the interests of the company above your own. This means avoiding conflicts of interest, disclosing them when they exist, and recusing yourself from decisions where you have a personal stake.
These are affirmative obligations. The law expects you to proactively uphold them. Passive or uninformed participation is not enough.
Governance Failures Often Start Small
One of the biggest myths I hear from business owners is, “That kind of thing would never happen here.”
But fiduciary breaches don’t usually begin with fraud. They begin with everyday habits and corner-cutting:
- Making decisions without holding a vote or documenting the result
- Failing to keep board or member meeting minutes
- Commingling personal and company funds
- Executing agreements without board approval
- Ignoring or failing to disclose conflicts of interest
Each of these can expose executives and board members to personal liability and can cost the company dearly in lawsuits, audits, investor mistrust, and reputational damage.
A Cautionary Tale: Bitwise Industries
The collapse of Fresno-based Bitwise Industries in 2023 is a powerful (and painful) reminder of how things can unravel. The company’s leadership allegedly engaged in questionable real estate deals, failed to disclose material information, and laid off hundreds of employees despite appearing to raise significant funds.
It’s easy to say, “That’s extreme. I’d never do that.”
But here’s the truth:
If Bitwise leadership had even made a minimal attempt to follow their fiduciary duties—documenting decisions, disclosing conflicts, voting transparently—the collapse might never have happened.
It wasn’t just the misconduct. It was the absence of process, visibility, and accountability that enabled it to go unchecked.
What You Can Do
Good governance doesn’t require big-firm bureaucracy. It requires intention, clarity, and consistency. At VBTL, I help businesses:
- Formalize board procedures and voting requirements
- Draft and maintain minutes that hold up under scrutiny
- Structure clean, defensible bylaws and operating agreements
- Design conflict-of-interest policies that work
- Train officers and directors on what fiduciary duty actually means in practice
- Serve as outside general counsel for practical, ongoing compliance
Final Thought
Your company is likely your most valuable asset. Don’t let governance failures put it at risk. The law doesn’t distinguish between well-meaning shortcuts and intentional misconduct when fiduciary duties are breached.
Good governance protects value. Poor governance erodes it.
If you're a founder, board member, or executive leading something important—especially in Fresno or across the Central Valley—I'd be honored to help you build it responsibly.
Bitwise’s Legal Misadventures, Explained - Spotify
Bitwise’s Legal Misadventures, Explained - Apple Podcasts
*Jesse Molina is the Founder and Managing Attorney of Valley Business & Tech Law and an Adjunct Professor of Corporations Law. Based in Fresno, CA, he advises companies throughout California on governance, fiduciary obligations, and general counsel matters.*
