No bank, banking association, or trust company organized or operating under the laws of the United States, in a city of more than 200,000 inhabitants, may have as director or other officer or employee any private banker or any director or other officer or employee of any other bank, banking association, or trust com pany located in the same place, with the following exceptions: (r) A director or other officer or employee of such bank, bank ing association, or trust company may be a director or other officer or employee of not more than one other bank or trust com pany organized under the laws of the United States or any state where the entire capital stock of the one is owned by stockholders in the other; (2) a director of class A of the federal reserve bank may be an officer or director, or both, in but one member bank; (3) the prohibition does not apply to mutual savings banks which have no capital stock.
Amendments to Clayton Act The Clayton Act was amended in 1916 by the Kern Amend ment, which permits any officer, director, or employee of any member bank or class A director of a federal reserve bank, who first procures the consent of the Federal Reserve Board, to be an officer, director, or employee of not more than two other banks, banking associations, or trust companies, whether organized under the laws of the United States or any state, if such other bank, banking association, or trust company is not in substantial competition with such member bank. The board is authorized, at its discretion, to grant, withhold, or revoke such consent, and the authority requires it to define what constitutes substantial competition.
Another amendment permits any director or other officer, agent, or employee of any member bank, with the approval of the Federal Reserve Board, to be a director or other officer, agent, or employee of any bank or corporation chartered under federal or state law and principally engaged in international or foreign banking or banking in any dependency or insular possession of the United States, in the capital stock of which the member bank has invested as allowed by law.
The law was further amended in 1917 to the effect that a state bank becoming a member bank may continue to exercise its full charter and statutory rights as a state bank or trust company, which amendment exempts it from certain provisions of the above laws. In the Edge Corporation Act of 1920 the provisions of the Clayton Act, as amended above, were made to apply to the direc tors, and other officers, agents, and employees of the Edge corpora tions, provided, however, that any director, or other officer, agent, or employee of a member bank, having obtained the approval of the Federal Reserve Board, may serve at the same time as a direc tor or other officer, agent, or employee of an Edge corporation in the capital stock of which such member bank may have made investment.
The purpose of the Clayton Act and amendments was to pre vent unlawful restraints and monopolies, to prevent common control of member banks and private or state banks or trust com panies engaged in the same activities as member banks, and to maintain competition both as between large banks in different large cities and between banks in the same large city. It is opposed to centralized bank control, and possibly results inci dentally in getting on some boards of directors men of smaller caliber than might otherwise be obtained if such limitations were not imposed.
Selection and Services of Directors The directors are put under oath to administer diligently and honestly the affairs of the bank and to be qualified. These oaths are sent to the Comptroller of the Currency and filed.
A director is not an agent of the bank; he cannot act separately and independently of his fellow-members. Only when the board of directors is duly convened and acting as a unit does it represent the bank. A majority of the board usually constitutes a quorum, but this is determined by the charter provisions. The board is presumed to meet and counsel together and determine upon ac tion. Of course, the board may appoint one of its number to act as agent of the bank.
Directors normally serve without salary. Since they are big business men, the time and attention required of a director repre sent considerable sacrifices. In some large banks, directors arc given fees for each meeting they attend, but these fees do not compensate for the sacrifices. Formerly certain directors did not take seriously the very important work of their office; they ac cepted the office because of the honor and business prestige that attach to it, but gave too little attention to the actual duties involved; but public opinion, as well as the courts, is insisting upon a more serious attitude from directors. The banking law prohibits any officer, director, or employee of a member bank from being the beneficiary of or receiving directly or indirectly any fee, commission, gift, or other consideration for, or in connection with, any transaction or business of the bank, other than the usual reasonable salary or director's fee paid to them for their services.