Which duty requires disclosure of conflicts and recusal from related transactions in governance?

• A. Duties of care and obedience only.
• B. Fiduciary duty to avoid conflicts of interest; disclosure and recusal.
• C. Duty to maximize management's preferences.
• D. Duty to maintain secrecy of all board discussions.

Answer: (B)

Disclosing conflicts and recusing from related transactions sits at the heart of the fiduciary duty of loyalty in governance. When a director or officer has a personal interest that could influence a decision, the obligation is to reveal that interest and step aside from the decision-making process to prevent self-dealing and ensure decisions are made in the corporation’s best interests. This approach preserves impartiality, maintains fair dealing in transactions with affiliated parties, and often supports independent review by disinterested members or committees. In contrast, duties of care and obedience focus on diligence and compliance with governing documents and law, not specifically on conflicts; maximizing management’s preferences is inconsistent with fiduciary loyalty, and secrecy of board discussions addresses confidentiality rather than conflicts management.