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.
The report of the Interstate Commerce Commission in 1914 on the financial history and status of the New York, New Haven and Hartford Railroad, strongly condemns inactivity and ignorance on the part of the directors. 'There are too many ornamental directors," to quote the plain language of the Commission, "who have such childlike faith in the man at the head, that they are ready to endorse or approve anything he may do.....The minutes of the New Haven's meetings reveal that the Board confined itself almost wholly to ratifying and authorizing action; there was little real information or discussion. None of the directors would have been so careless in the handling of his own money as the evidence demonstrated they were in dealing with the money of other people".
On the other hand, there is sometimes a mistaken idea that the board of directors- ought to manage all the details of a business. Its real function is selecting the right officials, -outlining policies, and passing well-informed judgment from time to time as to the efficiency and honesty of the management. One of the most successful publishers in the United States, Colonel Henry Watterson of Louisville, recently gave his opinion on the witness stand of directorates which run too much to details. Referring to the management of the New York World after the death of the organizer and former proprietor,. Joseph Pulitzer, Colonel Watterson said: "I understand that the paper is edited by a Board of Directors. You might as well try to run a locomotive by a Board of Directors. The moment the wisdom of one man or two men is superseded by the folly of one man or two men, the efforts of a lifetime may then and there be wrecked. It has been done repeatedly".