Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1891-08-03
OPINION Is DIVIDED
As to the Function of the Directors
of Big Corporations.
BANKS KSAREEXPOsED TO HARDSHIPS
Stockholders Come Off Much Better Than
One Would Expect,
CONSIDERING THE CHANCES FOR FRAUD
ESPECIAL TELEGRAM TO THE pIsPArCH.1

reviews the speculative and financial sltua.
tion for to-morrow's S,sn as follows:
As 1 expected, the views which I ad.
vanced last Monday of the functions of di-
rectors have not met with unanimous ap.
proval Those of my friends who are them.
selves directors of course applaud my idea
that nothing should be expected of men in
their position beyond good faith and due
diligence in selecting executive officers, but
others, who are merely stockholders, and
especially those who are small stockholders,
think that this is not the whole duty OF
their official representatives in the manage
ment of the corporations to which they have
intrusted their money.
They say that they have made their in
vestments on their faith in the business
ability of those representatives, and they
expect it to be exerted in their behalf. If,
instead of this, directors are to do no more
than appoint agents, there is no need of
them at all. The stockholders might as well
hold an election of officers once year, and
then leave the business of the company in
their hands till the next annual meeting
comes around. If the intermediate monthly
or quarterly meetings of directors are mere
farce and amount to nothing they can easily
be dispensed with. But if there are to be
directors at all, and they are to pretend to
direct, they should direct in reality, and not
lull into false security those who rely upon
their vigilance to protect their interests.
MUCH TRUTH IN IT.
| will not deny that there is great deal
of sense in this sort of talk, and, as 1 said
last Monday, since so many stockholders in
dulge in the delusion that these directors
really discharge the functions popularity at
tributed to them, no conscientious, self
respecting man will accept the Office without
at least endeavoring to make it more than
sinecure. But, as 1 also said, with the best
intentions in the world, and the most
earnest efforts, it is not possible for
director to oversee the business of a cor
poration with the same thoroughness and at
tention to details that he devotes to his own
affairs.
Even if it were possible, the number of
those who have the inclination to try to do
it is too small to meet the demand. very
much fear that no amount of indignation
and scolding will reform the matter, and
that corporations will continue to be
managed, as they have hitherto, by their
A CASE OF THE PAST.
NV attention has been called to the At
lantic National Bank case, which happened
some years ago, where the directors were
compelled to pay large sum of money to
the shareholders to make good losses which
the bank suffered through their neglect of
duty Ny recollection is that in that case
the neglect chiefly complained of was the
af41 afn ehA
after he had been proved to be dishonest,
and also in a ratification by the directors of
some of his unlawful acts.
The stockholders were, fortunately for
them, protected by section 11S of the ma
tional banking act, which, after declaring
that the franchises OF banks formed under it
shall be forfeited by violation of the pro-
visions of the act, goes on to declare that
''in cases of such violation every director
who participated in or assented to this shall
be held liable in his personal and individual
capacity for all damages which the associa-
tion, its shareholders or any other person
shall have sustained in consequence of such
violations"
PROTECTION IN STATE LAW.
Our State laws contain numerous clauses
making directors criminally liable for their
wilful wrong-doing, but am not aware of
any Inc lldt L nave quoted ITOH the
national banking act, gives the shareholders
the right to sue them for losses through
their misconduct. OF course, this defect |
could be easily remedied by the Legislature,
and in view of recent occurrences it is very |
likely that it will be-
l should not omit to mention that there |
are directors, who without the incentive of |
a fear of legal penalties and in many in |
stances without adequate remuneration, do |
far more for their constituents than merely |
to vote for officers At the cost of much |
personal Inconvenience, and frequently of !
considerable loss to themselves, they de-
vote to the offices of the institutions they |
direct an amount Of time and thought far
beyond that required by their strict duty
and with the happiest results. They make |
their institutions succeed, but they also
help to ditfuse the unfounded belief to
which L called attention q week ago, that /
all directors are bound to do as much as
they do, and are blameworthy if they do |
not. The stockholders who profit by the
labors of such men are lucky, but those who
do not have no reason to complain.
ANOTHER OBSCURE POINT
And this leads me to remark that, in my
opinion, the great maj ajority of investors in
the stocks of corporations have an extremely
dividends upon them, and of the risks of loss
incurred in conducting their affairs. The
,apItal of a corporation, in the first place, is
almost always larger than that of most
private concerns, and its business cor
more extended Otherwise |
there would be no need of its incorporating
rs means of bringing together small
amounts of capital into one great aggregate.
With this increase of capital and of busi-
ness, the opportunities of loss are multi
Dlied, and, hampered as they are by sense
IF their responsibility, the officers of the con-
pany do not usually feel at liberty to take
'isks which individuals do, and of thus
making great profits at a single stroke.
know that there are exceptions to this rule,
,ut, like those of the jealous and devoted
directors l have mentioned, they are not
requent, and should be highly priced when
hey are found Most corporations are con-
lucted in humdrum, routine way, and 1
wonder that SO many of them succeed as
veil as they do. They make, when they
make. bv dollars and cents, and lose, when
hey lose, by hundreds and thousands OF
Iollars.
HARDSHIPS OF BANKS
Banks, especially, have hard time. They
re the target for every sort of rascality, of
which that perpetrated by the dishonest
lerk of Shipman, Barlow, Larocque g.
,hoate, and which cost two or three banks
ver $500, 900, is the latest specimen; the
,tate Legislature and Congress are both hos
lie to them; their taxes are enormous, and
O is their outlay for rent and clerk hire.
% meet all these losses and expenses they
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