Directors

Persons legally chosen to manage the afifairs of a corporation or company. Directors, board of, or directory. The whole body of such managers, jointly considered. The directors of a corporation are subject to the obligations imposed upon trustees and agents.^ They are officers and agents, and represent the interests of the abstract legal entity, and of those who own the shares of its stock.* To the stociiholders they are not as technical trustees, but as mandataries, bound to exercise ordinary skill and diligence. They are not liable for a mistake of judgment, within the scope of their powers; but they are responsible for losses occasioned by embezzlement, willful misconduct, breach of trust, or gross inattention by which fraud has been perpetrated by an agent, officer, or co-director.^ They are at least quasi trustees for the creditors of the corporation. When that is insolvent good faith forbids that they use their position to save themselves or one of 'their number at the expense of other creditors.* » Town of Panville v. Shelton, 76 Va. 311 = List Publishing Co. v. Keller, 30 F. E. 772 (1887), Wallace, J. 3 Warden v. Union Pacific E. Co., 103 U. S. 658 (1880), cases. ■" Twin-Lick Oil Co. v. Marbury, 91 tJ. S. 589, 6S7 (1876). s Spering's Appeal, 71 Pa. 20 (1872), cases, Sharswood, J.; United Society of Shakers v. Underwood, 9 Bush, 609 (1873), cases; First Nat. Bank of Ft. Scott v. The directors of a corporation are its exclusive executive agents, tmA, as it can act only through them, the powers vested in the corporation are deemed conferred upon its representatives; but they are, nevertheless, trustees for the stociiholders. The law recognizes the stockholders as the ultimately controlling power in the corporation, because they may at each authorized election entirely change the organization, and may at any time keep the trustees within the line of faithful administration by an appeal to a court of equity... General power in a board of directors "to perform all corporate acts"refers to the ordinary business transactions of the corporation. The stockholders alone can make or authorize fundamental or organic changes.* As a rule, the directors of a corporation are only required, in the management of its affairs, to keep within the limits of its powers and to exercise good faith and honesty. They undertake, by virtue of the assumption of the duties incumbent on them, to perform those duties according to the best of their judgment and with reasonable diligence, and a mere error of judgment will not subject them to personal liability for its consequences. And unless there has been some violation of the charter or the constating instruments, or unless there is shown to be a want of good faith, or a willful abuse of discretion, or negligence, there will be no personal liability. They are personally only bound, in the management of the affairs of the corporation, to use diligence and prudence, such as men usually exercise in the management of then* own affairs of a similar nature.. But they are personally liable if they suffer the corporate funds or property to be wasted by gross negligence and inattention to the duties of their trust.^ That which directors, by proper diligence, ought to have known as to the general course of business in their bank, they may be presumed to have laiown, in any contest between the corporation and' those who are justified by the circumstances in dealing with its officers upon the. basis of that course of business.^ See Corporation; Dividend, 3; Meeting; Mi KirrEB, 2; Trust, 1.

Drury v. Cross, 7 Wall. 302 (1868); Jackson v. Ludeling, 21 id. 616 (1874); Eichards v. New Hampshire Ins. Co., 43 N. H. 263 (1861). 1 Cass V. Manchester Iron, &o. Co., 9 F. E. 640 (1881); s. 0. 13 Eep. 167. 2 Ackerman v. Halsey, 37 N. J. E. 363 (1883), cases, Eimyon, Ch. See also Williams v. Hilliand, 38 id. 374 (18S4), cases; Chicago City E. Co. v. Allerton, 13 Wall. 233 (1873); Bradley v. FarweU, 1 Holmes, 440 (1874), cases. * Directors as fiduciaries, Bent v. Priest, 86 Mo. 476 (1885), cases: 35 Am. Law Eeg. 125-33 (1886), cases.

Liability of, of national banks, and generally, Movius V. Lee, 30 F. E. -306-7(1887), eases; Witters v. Sowles, 81 id.

1 (1887), cases; 23 Cent. Law J. 172 (1886), cases.

Powers of, of banks, 22 Cent. Law J. 318 (1886), cases; of corporations generally, 19 id.

305-10, 327-30 (1884), cases; 6 South. Law Eev. 366-413 (1880), cases. Dealing