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.
As to the legal status and responsibilities of a director, it seems to be well settled that a director is a quasi-trustee on behalf of the body of shareholders. He is certainly not entitled, either legally or morally, to use his position primarily for his personal profit at the expense of the other shareholders. While there is no question that this is frequently done, and as we shall see later on is often defended, it is permitted in many companies to continue only because the shareholders cannot offer legal proof of their suspicions.
A director ordinarily is not liable to the stockholders for-acts of his co-directors unless he participates in the action or acquiesces by not making a vigorous protest. Just what is meant by "vigorous protest" is difficult to say. Where the wrong is serious, the directors ought to apply to the courts. In New York State there is a provision to the effect that directors must file their protest, in writing, or cause it to be entered in writing on the minutes.