What is self-dealing in the context of corporate governance?

Self-dealing in corporate governance refers specifically to a situation where a director or an executive of a corporation enters into a transaction that benefits themselves at the expense of the corporation. This concept revolves around conflicts of interest and the duty that directors owe to act in the best interests of the corporation and its shareholders. When a director is involved in a transaction that results in personal gain—especially if that transaction is not fully disclosed or is conducted without proper oversight—this is deemed self-dealing.

The fundamental principle behind this issue is that corporate directors have fiduciary duties to act loyally and in good faith towards the corporation. When they prioritize their own interests over those of the corporation, it raises ethical and legal red flags. Therefore, the scenario of a director receiving an unfair benefit directly through dealings with their own corporation encapsulates the essence of self-dealing.

The other options do not accurately describe self-dealing. Acting on behalf of shareholders, making decisions that benefit the company, and relinquishing control of decision-making are all aspects of sound corporate governance and do not inherently involve conflicts of interest or the unethical actions characteristic of self-dealing.