Is it legal for a CEO to take money from a corporation for personal use ?
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Is it legal for a CEO to take money from a corporation for personal use ?
Using company debit card for personal expenses.
Asked on March 22, 2012 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
In terms of whether or she can do this, it depends on whether he or she has the authority to use company funds for personal expenses. The CEO of a publically traded company, or even of a privately held corporation with more than one investor or shareholder, typically cannot do this; the shareholders typically do not authorize use of corporate funds for personal purposes. However, there are several wrinkles or caveats to this--
* Some personal expenses may be authorized as part of the CEO's compensation--for example, it's not uncommon for a CEO to be given a car allowance, health club or country club memberships, a certain allowance for entertainment, etc., and, if so, it would be proper to sue a debit card for these permitted expenses.
* Even if the CEO is not formally allowed to do this, only the company's board of directors typically could bring a legal action seeking recovery of the money and/or an end to this practice--and if they are overall satisfied with what the CEO is doing and do not take action, then it effectively does not matter whether he or she could officially do this.
And if the CEO is also the sole owner of a corporation, he or she could clearly authorize him- or herself to use company funds any way he or she wishes.
However, even if a CEO may officially or practically do this, in some cases, the expenses might not be allowed as business expenses, which means there could be a tax consequence to CEO and company.
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