Final answer:
Breaches of fiduciary duty of loyalty by corporate officers and directors include self-dealing, interests in competing businesses, and accepting kickbacks. These breaches can lead to poor corporate governance, illustrated by the Lehman Brothers collapse, where a lack of board oversight resulted in excessive risk-taking and inaccurate financial reporting.
Step-by-step explanation:
Corporate directors and officers can breach their fiduciary duty of loyalty and create conflicts of interest in several ways. One typical scenario is when they engage in self-dealing, where they make decisions that benefit themselves personally at the expense of the company. Another example is when directors or officers have a significant ownership or interest in a competing company, leading to divided loyalties. Additionally, accepting personal benefits from third parties in exchange for certain corporate dealings, also known as kickbacks, is a clear breach of this duty.
In the context of corporate governance, the board of directors' role is to oversee management and act in the best interests of the shareholders. Conflicts of interest can arise when top executives exert influence on the selection of board members, which may result in a lack of true independence and oversight. Furthermore, a board that lacks experience or fails to understand the complex operations of the company, as seen in the case of the Lehman Brothers collapse, can lead to a failure in governance. This lack of proper oversight and governance can result in excessive risk-taking, as board members may not effectively challenge the decisions made by executives.