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 somewhat different case arises when the officers of a corporation are financially interested in another company which has proved to be a money loser or which needs assistance. If the business in which they are interested is in any way related to the business of the corporation of which they are officers, it is frequently an easy and tempting procedure to "unload" a portion of their holdings or to secure financial assistance in some other form. The process is especially easy when the active officers are able to work together without interference in putting through their plans, and when their fellow directors have little direct personal knowledge of the details of the business.
Sometimes schemes of the same general type may be put through with a view to enabling the officers to secure personal control, for their own benefit, of another company in which they are financially interested. By inducing the company in which they are officers to take stock additional to their own, they may be able to acquire the desired control.
It is not necessary to say that schemes such as these involve a clear breach of a director's duty and are in themselves incompatible with the higher standards of business conduct. Each case must be judged on its own merits.