Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1891-07-27
In the Management of Corporations
Not Clearly Understood.
THEY HAVE BUT LITTLE TO SAY.
The Parade of Their Names Merely a
Piece of Arrant Humbug
INTENDED TO DELUDE THE IGNORANT
ESPECIAL TELEGRAM TO THE prsp,-

OF the American Loan and Trust Company
should feel sore over the ruin OF the COM
pany and the disappearance of the capital
they had invested in it. Losing money is
never pleasant, aud it is particularly un-
pleasant when it happens Unexpectedly and
in a place where it was supposed to be i'm
probable
For many wears trust companies have en-
.ioyed continuance of such prosperity that
the only concern Of capitalists has been to
Judge of their relative merits The quota
1ions OF the stocks OF some of them have
scared aloft into the region of four figures,
and the very poorest of them have been
considerably above par That one among
them should make less money than the
Others was regarded as natural, but that it
should make none at all, and even go into
bankruptcy, was contingency not expected.
SEEKING \ sCAPEGoAT.
As usual, too, when an unforeseen calam-
ity occurs, those who suffer by it begin look
ing about for somebody to blame That
there would be no accidents if every one
did his Guty on all occasions is indisputable
and in tracing back the chain Of causes and
effects which leads TO mischief, some sin of
omission or commission is sure 10 be de-
tertri. When, too, the particular sin comes
10 light, the avoidance or tie prevention of
il looks SO easy that even those who did not
commit it. bat who might have prevented it
if they had been on the alert, are censured
tor not having done SO.
Thus, in the case OF the American Loan
and Trust Company. if the Board of Directors
had known how recklessly the funds of the
company were lent and how great was its
peril Of bankruptcy, they might have
avoided the catastrophe, or at least have
mitiEated its severity. For their failure in
this respect they are accused of a neglect of
duty and there is even talk of legal pro-
ceedingS against them. OF the particular
circumstances attending the mismanage-
ment which has ruined the American Loan
and Trust Company L am not sufficiently
well informed to speak confidently, and it
may be that some of the directors at least,
were criminally negligent and should be
made TO pay for 1t.
FUNCTIONS OF DIRECTORS.
The company's fate, taken in connection
with the recent miSfortunes Of other financial |
institutions, such as the Ninth National |
Bank IN this city and the keystone National |
Bank IN Philadelphia 10 saw nothing of |
nice little concerns in other parts of the |
country. has, however, called forth so much |
M.
in regard TO the functions of directors and |
their responsibilities, that l am moved 10
express my views on the subject and to eX-
pose what seems to me TO be q gross mis-
understanding of it,
Judged by what I see and hear. the idea
Is quite prevalent that because directors of |
corporation are called directors their duty
Is to oversee the corporations business and |
10 keep themselves informed of all its de-
L. - l., |
children and simple-minded people enter
tain of Queen Victoria. They fancy that
she sits all day long upon her throne in her
royal robes, with a crown upon her head
and a scepure in her hand, as she is repre-
sented in pictures, hearing embassies and
petitions and giving orders for the govern
ment Of her kingdom, whereas the fact is
she occupies her throne scarcely once wear
and her government is carried on by her
ministers Of state, who consult her upon
comparatively few of the measures taken
in her name.
THEIR POWERS LIMITED.
Many boards Of directors meet only once
in three months, and have as little to do
with their companies business as the Con-
gress Of the United States has TO do with
executive affairs and to expect that of them
l. as absurd as it would be to expect it of
Queen Victoria. A very little knowledge
or the routine of affairs in a bank or trust
company, not TO speak of other corporations,
torbids the thought of that personal super
lntendence and control bv directors for
which ill-informed persons are clamoring.
II the payment Of every check. the ac-
centance of every draft, and the making of
every loan had to be debated and voted |
upon hv a board of dozen or more men,
the business day would be half gone before
one thing was determined upon. The real
executive agent OF a corporation is, or
should be, its President, and it is in the Sc
lection Of a President and of his assistants |
that the real function of a Board of Direct
urs mainly consists. They are bound TO use
ali possible diligence in inquiring into his
fitness for the office before they entrust him
with II; but, having once appointed him, |
common sense dictates that he should be
left 10 exercise his own Judgment in the
J performance of his duties, untrammeled by
their interference, otherwise his selection is
one which ought not 10 have been made.
AN ADVISORY COUNCIL.
1t Is usual, however, for the directors of
financial institutions in cases where fire.
guent meetings of the board would be in
convenient to appoint from among their
number small executive committee, as
sort Of advisory council. to assist the presi-
dent by their knowledge and experience in
the decision Of doubtful and important
questions. and a prudent president is
always glad TO avail himself of their SER
vices He reports TO them what he has
done and what he proposes doing; hears
their suggestions, and Is governed by their
decisions. They constitute his cabinet,
and being usually the ablest members of
the board, or, al least, those who have the
most leisure to devote to the company, they
share with him the responsibility for such |
measures as they approve.
i fancy that when all the truth about the |
Loan and Trust Company comes
to be known it will be found that its Ex-
ecutive Committee, as much as its president
Is TO blame for the disaster which has over
taken il. 1t is pertinent question, and 1
fancy that it has by this time risen spon-
in the minds of many of my
readers; why, if the functions of directors
extend no further than to the selection of
president and the appointment of an Ex-
acutlve Committee, are so much pains taken
10 choose As directors of institutions men
well known to the public. and TO parade |
their names in circulars and advertise
nents?
DELUDISG THE PUBLIC.
My answer is that in nine cases out ten it
is for purposes of humbug, pure and simple. |
md it is done by the promoters of compan-
les IN the beginning Of their careers to in
-plre confidence and TO attract business, and
L Is kept up TO crafty vanity and love of
IOtorietv Of men who like to see their names
IN print. In the tenth case the directors
,re few in number, and, being large stock
holders. they take real interest IN the
affairs, whereas ia the other nine
heir functions are limited, as | have de-
acrihed
Still, considering that, however wrongly,