What does the term "fiduciary duty" mean?

The term "fiduciary duty" refers specifically to the obligation to act in the best interest of another party, typically in a relationship where trust and reliance are key components. This concept is foundational in various professional contexts, including finance, law, and corporate governance. For instance, a trustee has a fiduciary duty to the beneficiaries of a trust, ensuring that their interests are prioritized over personal interests or profits.

In contrast, the other options describe duties or responsibilities that, while important, do not capture the essence of fiduciary duty. Following company policy refers to compliance with corporate guidelines, which is distinct from the ethical obligation embodied in fiduciary duty. Disclosing financial transactions is about transparency and accountability but does not necessarily involve prioritizing another party’s interests. Reporting potential risks relates more to risk management and does not inherently involve the trust relationship that defines fiduciary responsibilities. Thus, the correct answer captures the intrinsic aspect of duty towards others that is at the heart of fiduciary relationships.