The evening times. [volume] (Grand Forks, N.D.) 1906-1914, 1906-09-28
Address of William Banet Ridgely
Delivered Before the Pennsylvania Bankers Association
Philadelphia, Pa, Thursday Evening
COMPTROLLER OF THE CURRENCY.

Ut runs ude 10 laISo tuIuOFS, IueTo Is
never any reasonable excuse for the
failure of bank or trust company
1t is almost always the result of in
excusable folly and incompetence or
dishonesty and fraud. and often due
to all of these. combined. When a
bank does fail. it is the fault of the
board of directors. Many others may
be to blame. perhaps more than the
directors, but the final Responsibilities
'of bank management rests upon the
directors, and they are to blame, that
is, the whole board as board and
the members as individuals are to
blame If they allow the officers or per-
haps only few of the directors, to SO
manage the business of the bank as to
bring on insolvency. 1t may be the
president or cashier who commits in
detail the acts or crimes which wreck
bank; the directors may be entirely
ignorant of what is being done. but
it is their fault. if they allow them
selves to be kept in ignorance or to be
deceived and thus permit it to be done
1t is the duty of the directors of a
bank to keep themselves informed
about its business and to so direct its
affairs as to prevent its failure.
The laws under which most joint
stock banks are organized define the
duties and responsibilities of directors
in practically the same terms. The
National Bank Act provides that The
affairs of each association shall be
managed by not less than five direc-
tors" and that leach director when
appointed or elected. shall take an oath
that he will, SO far as the duty de-
wolves on him, diligently and honestly
administer the affairs of such associa
ton, and will not knowingly violate. or
willingly permit to be violated. any
of the provisions of this title"
In many cases the federal courts
have declared that directors duty is
not discharged by merely electing
officers of good reputation, ability and
integrity to manage a bank and then
leaving it's business in their hands.
The board of directors, the courts have
held. is bound to maintain 4 super
vison of the affairs of their associa-
ton, and to have a general knowledge
of the character of its business and the
manner in which it is conducted. and
to know at least upon what security
its larger lines OF credit are given.
The United States supreme court de-
cisicn most in point is the case of
Briggs VS.. Spaulding. which was a suit
brought by the receiver OF the First
National Bank of Buffalo against the
defendants as directors, for failure
to perform faithfully and diligently the
duties of their Offices; that they had
failed to call and hold meetings; APP
point any committee of examination;
require bonds or make personal eX-
animation into the conduct and man
agement of the affairs of the bank, but
allowed the executive officers to man
age it without supervision. In render
ing it's decision. the court said, Mr.
Chief Justice Fuller delivering the
opinion:
without reviewing the various
decisions on the subject, We hold
that directors must exercise Or
binary care and prudence in the
administration of the affairs of the
bank, and that this includes some
thing more than officiating as
figure-heads. They are entitled
under the law to commit the bank
ing business, as defined, to their
duly authorized officers, but this
does not absolve them from the
nor ought they to be permitted to
be shielded from liability because
of want of knowledge Of wrong
doing, if that ignorance is the re-
suit of gross inattention." briggs
VS.. Spaulding, 141 U. S., 1922
In the case of Gibbons VS.. Anderson
ct al. decided by the United States
circuit court for the western district
of Michigan, April 81. 1897, suit was
brought by the receiver Of the City
National Bank of Greenville. to estab-
fish the liability of defendants who
were directors Of the bank, for negli-
gence in their performance of their
duties as such. One of the directors
of the bank, Moore. from the organi-
zation of the institution, dominated the
bank and through his malversation of
the funds the bank failed The other
directors, the defendants in this suit,
claimed to have been ignorant of any
thing wrong in the affairs of the bank
until it failed. The court, by Justice
Severens, district Judge. said referring
to the case of Briggs VS.. Spaulding:
'In my opinion it does not meet
the requirement of this state
ment of the law that directors
may cOnfide the management of
the operations of the bank to a
trusted official, and then repose
upon their confidence in his right
conduct, without making examina-
tons themselves, or relying upon
his answers to general questions
put to him with regard to the
status of the affairs of the bank.
The idea is not to be
tolerated that they serve as mere
ly gilded ornaments of the insti-
tuition, to enhance its attractive
ness, or that their regulations
should be used as lure to Gus
toners. 1t is inconsis-
tent with the purposes and policy
of the banking act that it's vital
interests should be committed to
one man, without oversight and
control" Gibbons VS.. Anderson,
so Fed, Rep, 345.)
We thus see that the highest courts
have decided and confirmed what is
the inevitable conclusion from any
thoughtful consideration of the sub
ject, that directors must actually dir
ect the affairs of their bank, and for a
director to fail to do so is to violate
his oaht and disobey the law in man.
ner for which he is not only morally
but legally responsible.
This is not any view of the relation.
ship of directors to their trusts, but
lis as old as the management of join
stock companies by boards of direc.
tors, chosen by the shareholders t.
represent them. 1t is the only tenablt
theory in relation to a directors dut,
and responsibility How thoroughly (.
1t actually carried out in practice? Ii