hundred miles distant. The power to vote by proxy enures, as we have shown above, more to the perpetuation of an existing board of directors than to its insecurity. To assimilate corporate elections to civil, by numerous polls and personal attendance, is a remedy too complex for practice; but no reason exists why the ownership of a given amount of stock, say a twelfth part of the whole corporate capital, should not constitute the owner a director; nor why several stockholders, who together own a twelfth part of the whole, should not possess the power to unite and designate some person to be a director-just as our State is divided into single Assembly districts, and not the whole Legislature chosen by a general ticket. These remedies would add greatly to the power of stockholders, and hence should be desired by all honestly disposed directors; for, "if he who standeth would take heed lest he fall," he can in no way so efficiently strengthen his integrity as by diminishing the chances of concealing his indirections.

THE KIND OF CORPORATIONS MOST PROFITABLE TO STOCKHOLDERS ARE THOSE WHICH CAN BE LEAST PROFITABLE TO MANAGERS.

The dangers which are thus inherent in every corporation exhibit themselves practically, with different degrees of virulence, in different kinds of business. Among vegetables, every species of plant is the prey of some peculiar race of insects; so every species of corporation may supply facilities for some peculiar depredation. We happen not to be conversant with the mysteries of any corporations but banking; hence, leaving the specific diseases of other corporations to be described and treated by persons possessed of the requisite information, we shall close this article, and take an early opportunity to direct to banks what we have.

further to say on the defects of corporations. Banking is, however, among the most simple uses to which corporate agency is applied, and hence, probably, among the most generally successful; for, usually, every species of corporation is pecuniarily profitable to the stockholders in a degree inverse to the extent in which its interests can be decently subordinated to the interests of its managers. This is the reason why railroad corporations are injured instead of being benefited by manufacturing their own cars and locomotive engines. Every such attempt is encumbered by the antagonistic interests of the corporate agents who conduct the manufacturing operations and procure the materials, while the profits and savings are hardly ever large enough to counterbalance these attendant disadvantages.

Finally; the gloomy view thus taken of corporations would seem sufficient, if generally believed, to deter every prudent man from hazarding his capital in corporate enterprises, when he possesses no motive thereto but to obtain a lucrative investment of his capital. Fortunately, however, for social progress, corporations are occasionally lucrative enough to sustain all the antagonistic disadvantages of corporate mismanagement, and to leave a sufficient overplus to abundantly gratify, and sometimes enrich, even the rank and file stockholders. Such instances of exuberant gains in corporations, are like instances of great longevity in the life of man. They are frequent enough hence, new corporations obtain stockholders; but such instances are not frequent enough to prevent fear-hence, stockholders in any corporation are rarely obtained without effort.

to encourage all men to hope;

THE DUTIES, OMISSIONS, &C., OF BANK DIRECTORS. 223

THE DUTIES, OMISSIONS, AND MISDOINGS OF BANK DIRECTORS.

THE DUTIES OF BANK DIRECTORS.

In the year 1829, the State of New-York, to protect the public against bank insolvencies, originated the Safety Fund System of banking, by which every bank subject thereto, was compelled to pay, annually, into the State Treasury, the half of one per cent. on its capital, till the payments should amount to three per cent. thereon; payments were then to be intermitted, till the fund should become exhausted by losses, when a further three per cent. was to be collected by processes similar to the first. Soon after the year 1836, several Safety Fund banks became insolvent, absorbing, by means of various frauds, not only the existing collections of the Safety Fund, but all the annual payments that would be made by solvent banks during the limit of their corporate existence.

Influenced by this sad aspect of an experiment which had lived down its original many enemies, the State, in the year 1838, discontinued the further creation of Safety Fund bank charters, and originated what are called Free Banks: voluntary associations, whose bank-notes are secured by pledges to the State of certain governmental stocks, (State and National,) or by such stocks, and by mortgages on unincumbered real estate, in equal parts each. Our purpose includes not the comparative merits of these systems, or the positive merit of either. So far as the banks of both systems are managed by directors, they will be within the purview of our remarks; but the Safety Fund banks are subjected by their charters to a Board of twelve or thirteen directors, while the Free Banks may adopt any number, or

any other mode of government which the proprietors shall prefer; hence the proprietors, in some cases, constitute a Democracy, governing personally, and to such the following treatise will be inapplicable:—

A DIRECTOR SHOULD POSSESS A GOOD THEORY OF CONDUCT.

Bank directors usually commence their duties with honest intentions towards their stockholders and the public. The misconduct which may supervene, will proceed from temptations incident to their office, and perhaps from the absence of well digested notions of the conduct that is proper. Some years ago, a person was asked whether he would accept the office of director, then vacant in a bank of his city. After deliberating, he replied, that as the office might result in some benefit to him, he would accept. When the answer was reported to the Board, who was to fill the vacancy, they refused to appoint him, lest he should sit at the Board mousing to catch something beneficial to himself, while they wanted a director who would accept office to benefit the bank. A man ought to watch his own interest, when conducting his own affairs, but when he is acting officially, he should lose himself in his public duties. We expect a soldier to sacrifice his life, if necessary, to the discharge of his duty; and we should condemn him for professing a less self-denying creed, how much soever our knowledge of human fallibility might induce us to pardon his short-comings, when death should obstruct his path. Fortunately, the performance of bank duties will peril only some forbearance from pecuniary acquisitions, and our creed ought to be self-denying enough to renounce these, instead of avowing them to be the motive of our services; nor is the principle new. The law will not permit a trustee to derive any indirect benefit from his trust, or any judge

or juror to decide in his own controversies; and the State. of New-York has, in its Constitution, consecrated the principle by prohibiting our legislators from regulating their own compensation, or even the number of days which shall be occupied in legislative duties. In some cities, also, no civic officer can become legally interested in any munici pal contract; and who censures not some recent high officers of our National Government, for participating in a private claim which they officially aided to adjust and pay? Thus thinking, the President of a large railroad corporation of our State refused to supply iron for his road, though his associate Directors, with the complaisance which is as vicious as it is common, offered him the contract. In his case, no contractor could have been more eligible, but the rejecter established a precedent that is more profitable for his corporation than the money it would have saved in purchasing the iron of him.

DIRECT COMPENSATION TO THE DIRECTORS IS PURER THAN

INDIRECT.

The remuneration of bank directors consists, with us, in an indefinite claim for bank loans, and which claim led formerly to so great an absorption of the country banks, whose capitals are small, that a law was enacted interdicting bank directors from engrossing, directly or indirectly, more than a third part of the capital of their respective banks; a quota which is, in some banks, divided equally among the directors, irrespective of any business merits of the borrower. This mode of compensation, when founded on ample security for the borrowed money, may, in small

This law, like most other legal regulations of bank directors, was made before the existence of banking associations; hence the directors of such associations are not in⚫luded therein.