DIRECTORS AND OFFICERS 1. Theory of corporate managentent.—The part nership, as we have seen, is a business institution in which each part of the mariagement is as great as the whole, or to put it in another way, in which each mem ber is a general agent of the concern. In the cor poration this general agency is lodged in the board of directors. The power rests in the board and not in the aggregate of the directors, for directors must act in the board. The stockholders are entitled to de mand that the directors put their heads together and give the corporation the benefit not alone of their in dR-idual judgment but of the collective judgment that grows out of intelligent discussion.
"Must directors direct?" is often asked. In spite of recent differences of opinion the .remark made by Coke centuries ago still holds good on principle: "Governors ought not to be idle as Cyphers in Al gebra." A director is not liable for the acts of' his co directors. IIe is not bound to attend all the meetings and is not liable for what is done in his absence. But "0.ross non-attendance" is a breach of trust. When a • director is compelled to leave the place where the inus are held, the safest practice is to act a leave of absence from the directors as a board. Directors can not vote by proxy on the general principle that an agent cannot delegate his authority.
2. Number and qualifications of number of directors is usually specified in the statute or charter and may run from three to twenty-one or even more. Frequently they are divided into classes, as in -the following provision in the certificate of the United States Steel Corporation: The number of the directors of the Company shall be fixed from time to time by the by-laws; but the number, if fixed at more than three, shall be some multiple of three. The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, each consisting of one-third of the whole num ber of the board of directors. The directors of the first class shall be elected for a term of one year ; the directors of the second class for a term of two years ; and the direc tors of the third class for a term of three years; and at each annual election the successors to the class of directors whose terms shall expire in that year shall be elected to hold office for the term of three years, so that the term of office of one class Of directors shall expire in each year.
In most states directors must be stockholders; the actual ownership of one or three shares is generally sufficient. In New York and some other states the by-laws may provide that directors need not be stock holders. The directors are generally given power to fill vacancies for an unexpired term.
The Dominion companies- act categorically pro vides that no person shall be elected a director un less he is a shareholder, owning stock absolutely in his own right, and to the amount required by the by laws of the company and not in arrear in respect of any call thereon. A minimum qualification of at least one share is required.
3. Meetings and quorions.—Directors are gener ally permitted to meet outside the state of incorpora tion. Meetings may be either regular or special. Notice of regular. meetings is not usually required. What was said about stockholders' meetings generally applies to directors' meetings. Frequently a quorum is ma.de to consist of less than a majority in order that business rnay be expedited. To prevent a majority of a bare quorum, which may be but a small propor tion of the entire board, from dominating the com pany, the United States Steel Corporation has en acted a by-law which provides: Ten directors shall constitute a. quorum for the transac tion of business; but if at any meeting of the Board there be less than a quorum present, a majority of those present may adjourn the meeting from time to time.
The affirmative vote of at least one-third of all the di rectors for the time being in office shall be necessary for the passage of any resolution.