This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
A corporation, having obtained its charter or fundamental constitution from the state, is expected to draw up and enforce its own internal regulations. It usually at once adopts written by-laws as its internal code. Thousands upon thousands of corporations, having adopted excellent by-laws, thereafter disregard them as completely as if they had never existed. The larger concerns, however, in connection with which more formality is necessary, and the smaller concerns in which there is current or probable friction among the members of the board, quickly discover that the by-laws are intended to be observed carefully and that by so doing much useless trouble may be averted.
The statutes of the State of California give a statement of the subjects which should be covered in the by-laws of a corporation, as follows:
1. The time, place, and manner of calling and conducting meetings.
2. The number of stockholders constituting a quorum.
3. Mode of voting by proxy.
4. The qualifications and duties of directors, and also the time and method of their annual election.
5. The qualifications and duties of officers.
6. The manner of election and tenure of office of all officers other than the directors.
7. Suitable penalties for violation of the by-laws.
Among the other subjects which are not essential, but are frequently treated, are:
8. Electing directors to fill vacancies up to the next succeeding meeting of the stockholders.
9. Order of business at directors' meetings.
10. Compensation of directors and officers.
11. Organization of standing committees of the board of directors.