1. How Chosen

Having described the resources of a bank and how they are used, we will now proceed to describe the duties of the various officers, beginning with the directors These have been partly set forth, and in this chapter only such matters will be included as have not already been mentioned.

At the outset it may be remarked that they are chosen by the shareholders at their annual meeting, and subsequently organize by choosing one of their number president. A director must always be a shareholder, and by the national banking law must own at least ten shares of stock. Once chosen, he remains a director until the election of his successor. If, therefore, shareholders fail to hold their annual meeting, or, if holding it, fail to eleel directors, those who were chosen at their previous meeting may legally continue to direct as before. Cases have happened of directors remaining in office for several years because the shareholders could not elect successors.

In selecting new directors for the Bank of England quite young men are chosen. The reason is, the president or governor serves usually for a year, and is always suc-ceeded by the senior director. As every director may, under this system, become governor, it is desirable to choose a new director sufficiently youthful to be at his when reaching the governorship of the institution.

2. Majority Rule

The rule of the majority prevails in boards of directors unless the by-laws or charter of the institution, or the statutes of the state, set up a different rule. Yet there are some obvious limitations to majority rule. Directors have no right to violate a plain provision of law, for example, lend to a man more than one tenth of its capital on his accommodation note. If a board should attempt to transgress this law, unquestionably a director would have the right to invoke the action of the courts, or of the supervising authority to prevent its violation. Indeed, he could not acquiesce in such action without becoming a wrongful participant.

Again, suppose the majority of the directors should declare a dividend that had not been earned, it would be the duty of the minority to resist payment, and to that end ask a court to enjoin such action. In short, any attempt to violate a law, which the majority of a board may undertake, the minority should resist; and, if need be, seek the aid of courts or other authority to make their resistance effective.

3. Directors Are Not Paid

Directors rarely receive any remuneration. Some of the larger companies are forming a practice of giving every director who attends a meeting ten or twenty dollars as an inducement to attend; in some cases small salaries are paid ; these are exceptional.

If unpaid, why are persons willing to serve as directors, since they assume liability by thus acting? Two reasons may be given : -

First. Many of them are large owners of the stock and are willing to act in order to have a better knowledge of its management. Furthermore, they doubtless think their service will be of some worth to the bank, and thus to themselves.

Second. Because in many cases the position will be of some worth to them from a business point of view. It is a kind of certificate of business ability, honesty and reputation. A man of doubtful character would not be knowingly chosen, unless he was powerful enough to accomplish this by his own votes, or the votes of others like himself. Such cases are exceptional. Generally directors are men of affairs, and their selection is a confirmation of their position in the community where they live.