Year: 1876

Responsibility OF Directors.


When Punch, some years ago, proposed
that railroad director should be made to
ride on the engine of every train he sug-
gested plan which certain stockholders of
railroads here now somewhat tardily incline
to use for their protection. A number of
stockholders of the Michigan Southern and
Lake Shore roads have taken steps to bring
suit against their directors, claiming dam
ages for mismanagement of the property,
and stockholder of the New Jersey Central
Railroad has appealed to the Chancery
Court of New Jersey with the same purpose,
demanding an injunction to restrain the
managers of the road from issuing bonds for
new loan, and requiring also an account
ing to the stockholders.


Why not2 The directors of corporations
have long been almost as irresponsible as
the Grand Turk or the King of Dahomey.
They have exercised greater powers, with
less responsibility, than any other citi-
zens in free country. This has
success of corporate enterprises is felt to de-
pend very greatly upon the ability of few
managers and upon their unrestricted power
to act for the good of the shareholders. But
there have been in recent years too many in
stances where directors have acted not in
the interest of those who held the shares or
bonds Of the enterprise, but have made their
own advantage the chief study at the ex-
pense of those who were, with them, inter-
ested in the enterprise, but who had no
power to interfere. Thus in Western mining
enterprises the freezing out" process has
become notorious, by which directors COM
pei shareholders to sell out at loss by levy
ing needless and arbitrary assessments.
Thus, too, savings banks directors have
shamelessly mismanaged and squan-
dered the money of poor depositors,
taking advantage Of the carelessness Of
bank superintendents and governors,
and on discovery have gone off scot-free.
Thus again railroad directors are accused of
using the property Of which they have
charge for their individual speculations
without regard to the interests of the bond
and share holders who own the road. If the
directors of savings bank invest the money
of depositors in worthless securities ought
they not to be personally responsible for the
loss, unless they can show that they hon.
estly used their best judgment2 If they are
found to have invested in State bonds and
other securities of doubtful and speculative
value when they might have bought federal
or New York State or city bonds, ought they
to be let off on plea of ignorance? Should
not their private fortunes be seizable to
make good the money they have, through
ignorance or for their own profit flung
away? So again, if railroad directors mis-
use their great power to make bargains, as
directors, with themselves as individuals if
a board makes the road it controls pay
tribute to another company in which only
the directors are interested if they enter
upon rash and ill-advised schemes or
spoculations or extensions or enterprises of
any kind, the result Of which is to injure the
property Of their shareholders, shall they not
be held individually liable. in their private
fortunes and in their persons. for such acts ?


There is hardly any kind of property in
the world which has become so precarious
as railroad shares. Not many years ago
prudent business men thought such shares
secure investments for their wives and
children nowadays no man. who Is not "in
the ring himself or by an intimate friend,
can sleep easily if he holds such "securities;"
as they are still called. 1t is regular and
almost Legitimate business for ''combina-
ton" to get control of the majority Of the
stock of corporation, and thereupon to
elect board of directors, who proceed at
once to make ducks and brakes of the prop
erty, leaving the innocent minority share
holder to pocket the losses they ruthlessly
infict. The modern railroad corporation,
especially in this country, has become the
football Of speculative directors. 1t is high
time to see whether those who assume con-
troll of corporate enterprises cannot be held
responsible for fairly good management in
the interest Of all the shareholders, and
whether the wealthy director, who has be-
come rich by manipulating the property in
trusted to him, shall not be held response
BILE by the poor shareholder, at whose cost
he has played the game.





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