DIRECTOR. one of t he persons chosen to act as a board of managers to control the affairs of a business corporation or joint stock company. Officers acting in a similar capacity for pleemo sy on ry are usually, thoilob not neces sarily, known as trustees. The director is usu ally a stockholder of the corporation and elected to his position by vote of the stockholders, the length of time for which he may hold his office and the manner of his election being determined by the by-laws of the corporation.
The director is in a certain sense the agent for the corporation. lie represents the corporation and not stockholders, and, while not strictly a trustee. he acts in a fidueiary capacity, and his respowsibility is not unlike that of a trustee. At common law the director is muter no liability for' the debts or obligations of the cor poration. Ile is liable to the stockholders in an action of tort for gross negligence or misfeasance in olliee resulting in loss to them. Ile is prohib• ited from using his position of trust fur personal profit, and his contracts made with the corpora tion for that purpose may be set aside on appli cation of a stockholder to the court,.
Generally speaking, the directors, acting as a board or through properly appointed agents, have authority to do any act in the line the legitimate business of the corporation which the company may itself do under its charter: hot they may not totally change that business nor dispose of what is essential to it without the consent of the stockholders. Vet in some juris dictions they may by their act bind the corpora tion to do acts which are strictly ultra tires. See ConeonATIoN.
In practice. much 1 if the business of the hoard of directors is transacted by a committee of its members, usually termed au •Acentive committee, whose powers are defined by the hydaws of the corporation or by vole of the hoard of direetors. In boards of hank directors in England a dis tinction is made between ordinary and extraordi nary directors, the former conducting the busi ness in its details, the latter having little to do with the actual business, and in reality Jaing honorary officers who allow their names to he used to benefit the undertaking by the distinction attached to them from their personal or financial position. This practice is mot 01111111(1 in the
United States. though not unknown. The disposi tion of the profits of the corporation is, under most charters, left largely to the directors. Thus they may, if they choose, apply profits to the ex tension of facilities or purchase of new plant, or other improvements, rather than to dividends, in Choir discretion and 'without a vote of the stork holders.
1\110cm statutes have increased the liability of of corporations to an extent considerably in the different. States of the United States. A provision frequently made is one mak directors personally liable for the debts of the eorporat ion if the} do not file annually with the Secretary of State a report. upon the affairs and business of the corporation. the vial English statutes known as the Joint Stock Companies Acts, the duties and responsibilities of directors are Ver• clearly defined. II is pro vided that if the directors of a company declare a dividend when the company is known to them to be insolvent, or declare a dividend to pay whirl] would to their knowledge make it insol vent, they shall be personally liable for the debts of the company to an amount equal to the dirt• (lend declared under such circumstances: in the United States the common law on this point generally prevails.
It is cc-toniary to pay directors a slight fee for their servives, hut this is usually insignifieant in comparison with the interests involved; usu ally the motive of the director in taking the office is the prosperity of the concern as benefiting him in the position of a stockholder. .See CORPORA and consult the authorities there re ferred to.