The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-09-28
BANK DIRECTORS
ARE RESPONSIBLE
RidgeIy Tells Bankers in PhiIa-
del phia Their Duty
DIRECTORS MUST DIRECT
If Bank Fails 1t Is Their Fault, Be.
cause They Have Not Exercised
the Proper Supervision
of Its Affairs.

Philadelphia, September 27.-The Penn
sylvania Bankers association began its
twelfth annual meeting today. The prin-
eipal address was delivered by William
B. Ridgely, comptroller of the currency,
who said
Except from very rare and exceptional
causes, such as sudden panics or runs due
to false rumors there is never any rea-
sonable excuse for the failure of a bank
or trust company. 1t is almost always the
result of inexeusable folly and incom-
petence 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 responsibility of bank man.
agement rests upon the directors, and
they are to blame, that is the whole
board as board and the members as in
divduals are to blame If they allow the
officers or perhaps only a 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 beng done, but 1t
is their fault, If they allow themselves
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 it's affairs as to pre-
vent its failure.
Defined Duties of Directors.
Tho aus under which most ioint 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 assoc
citation shall be managed by not less than
five directors" and that leach director
wnen appointed elected, shall take an
oath that he will, so far as the duty de-
wolves upon him. diligently and honestly
administer the affairs of such association,
and will not knowingly violate, or will
lingly permit to be violated, any of the
provisions of this title
In many cases the federal courts have
declared that directors duty is not dis
charged by merely electing officers of
go Ereputation, ability and integrity to
manage bank and then leaving It's bus
mess in their hands. The board of direc-
tors, the courts have held, is bound to
maintain supervision of the affairs of
their association, and to have a general
knowledge of the character of its bush
ness and the manner in which 1t is con-
Quoted and to know at least upon what
security its larger lines of credit are
given
Directors Must Direct.
The highest courts have decided and
confirmed what is the inevitable concJu-
sion from and thoughtful consideration
of the subject, that directors must actual
ly direct the affairs of their bank. and
for a director to fail to do so is to violate
his oath and disobey the law in manner
for which he is not only morally but le-
galy responsible.
This is not any new view of the re-
lationship of directors to their trusts, but
is as old Nhe management of joint stock
companr by boards of directors chosen
by the shareholders to represent them. 1t
is the only tenable theory In relation to
directors duty and responsibility. How
thoroughly is II actually carried out in
practice? In how many of the banks rep
resented in this convention do the di-
reetors actually direct and keep them
selves so informed as to the condition
of their bank, that they know themselves
it is being well and safely managed and
are not simply accepting the statements
of the officers in whom they have conf
dence, without any real knowledge of their
own?
Many Are Faithful.
In a great many cases directors faith
fully conscientiously and efficiently per-
form their duties. l believe the cases of
this kind increase in number every year
1t Is becoming more and more common to
find directors making or causing to be
made thorough examinations and audits
of the bank books, and checking up not
only the clerks and minor officials, but
also the presidents, cashiers and manag-
ing officers There are. however still too
many cases where the directors content
themselves with choosing officers whom
they believe to be honest and competent
and leaving everything to them Forum
ately, when the right kind of officers are
chosen, the results obtained are often
quite as good as when the directors fol-
low up the business more closely. There
is much to be said in favor of one man
management of any business, and espec-