The list of the directors may serve as a valuable factor in increasing the bank's business, for the nomination of citizens of character and ability will inspire the confidence of the community and will thus induce depositors to place their funds with the bank. The leading industries of the community should have representation on the board of directors, not only to attract their business, but also to keep the bank in touch with the condition of local economic interests. This information is of utmost importance to the board, for its main function is to express its approval or disapproval of all loans proposed by the officers of the bank. The directors are the sentinels who must guard against extending loans to unworthy borrowers. Directors also have complete control over the personnel of the bank and have final jurisdiction over appointments and dismissals of members of the staff.

Another executive function of the board, is periodically to examine the financial condition of the bank. This is more than a mere formality, for it is customary to retain outside auditors to scrutinize records and ledgers and to submit a detailed report of their findings.

In their legislative capacity the directors usually enact the by-laws of the bank. These regulations aim to secure uniformity in operations. The by-laws define the powers which officers may exercise, the rules which directors must observe at their meetings, and the procedure which shareholders must follow in their annual assemblies. Also, dividends can be declared only by action of the directors. In general, they may buy and sell property, enter into contracts, and avail themselves of any power which is specifically conferred upon the bank under its charter.

The organization of the board depends upon its volume of business. In the case of a small bank the board may consist of the legal minimum of five members, and they may meet as a single body at infrequent intervals. On the other hand, a metropolitan bank is governed by a board of about twenty-five members, who in turn are divided into small committees, each specializing in one or more of the duties described above. Groups of directors thus serve on personnel, auditing, and discount committees. The discount committee, which passes on all applications for loans, is the most active, and in a large bank may hold daily meetings.

For these services directors receive no salary, but it is customary to allow them a ten-dollar gold piece as an honorarium. Directors who seek a larger return by influencing the action of the board in granting loans to their own business interests, or in withholding advances to competing firms, commit an abuse of power which is not specifically prohibited by any section of the National Bank Act, but is nevertheless restrained by the action of the Comptroller of the Currency in requiring banks to state in their reports the full amount of loans granted to their directors.