The owners of the stock of a private corporation, as soon as the charter is granted by the state and the corporation fully organized, proceed to choose and elect a board of directors, and the board of directors, after their election, proceed among themselves to elect the officers of the corporation. It is generally necessary that at least a portion of the directors must be residents of the state which granted the corporate charter. The number of directors ranges from three up to practically as many directors as is considered necessary to conduct the business of the corporation.

It is usual in large corporations doing an extensive business to elect directors in three classes, one-third to be elected for one year, one-third for two years and one-third for three years. The reason for this is to prevent a complete change in the board of directors at any one election. Good business prudence demands that a large proportion of the directors remain in office because of their familiarity with the details of the business being conducted. If this method is adopted, at the expiration of one year from the first election an election would be held to elect directors to fill the places of those elected for one year, thus retaining in office the two remaining classes whose terms have not expired, and so on with the other classes of directors as their terms of office expire.

The directors, immediately after their election, hold a meeting called a "directors meeting." At this meeting the directors elect the officers of the corporation, which usually consist of a president, secretary and treasurer. Other officers of the corCHAPTER XXX.

Board of Directors poration are frequently a number of vice presidents, an assistant secretary and an assistant treasurer. These are customary officers of large corporations and not usual in small concerns.

It is generally the duty of the board of directors to formulate and adopt by-laws which are made for the government of the officers, directors and affairs of the corporation. These by-laws are required by law to be reasonable and to be in conformity with the provisions of the charter and the statutes of the state under which the corporation is organized. The by-laws should prescribe the number of directors, the offices to be filled by election, the mode and manner of calling general and special stockholders' meetings, general and special meetings of directors, general and special elections of the directors and officers, and the duties of the individual directors, officers and agents of the corporation, and should provide for the term of office of the directors and officers to be elected.

The president of a corporation is usually considered the legal head of the corporation, and when an act pertaining to the business of the corporation is performed by him, it is considered that he has binding authority to act as the agent of the corporate body. The president, however, is subject to the regulation of the board of directors and also to the restrictions and regulations prescribed in the by-laws.

The general duty of the secretary is that of custodian of the books and records of the corporation and the corporate seal, and to attach the corporate seal to written instruments when required. The president and secretary are the officers usually authorized by the board of directors to execute any instrument, note, bond, bill of sale, etc., in the corporate name, and under the corporate seal, that may be necessary to be executed by the corporation.

The usual duties of the treasurer are those of a fiscal agent, to keep the funds of the corporation in some safe depository, to keep the officers and directors informed as to the financial condition of the corporation and the amount of funds in its treasury, and to prepare and keep the financial records of the corporation. The treasurer is the officer usually empowered to sign checks and to pay out the funds of the corporation, but, like the president and secretary, he is bound by the by-laws and should never pay out money in any large amount unless specifically authorized by the board of directors to do so, or unless the corporate business is such and the by-laws so stipulate, that such payment should be considered one of the regular duties of the treasurer.

The by-laws of a corporation should provide for frequent stated meetings of the directors, who should assemble at the general offices of the company under parliamentary rules of order, and in such manner transact the business of the corporation. The president of the corporation, by virtue of his office, presides as chairman of the meeting. Reports from the treasurer and secretary and of the general manager (in corporations where there is such officer) are read, and from the reports and recommendations of those officers the business is taken up. It becomes the duty of the secretary to keep full and complete "minutes" of what transpires at the directors' meetings as well as at the stockholders' meetings. These "minutes" should be transcribed fully into a book kept for that purpose, known as a "minute book." The business should be transacted by resolutions voted upon by the president putting the question and calling for "Yeas" and "Nays." The majority favoring or disapproving a resolution generally decides the action of the directors upon the matter.

The duty of the secretary in keeping and in transcribing these "minutes" is a very important one, as often very important transactions are invalidated or made uncertain by carelessly or mistakenly transcribed "minutes." Every reasonably important act of a corporation should be first voted upon by the board of directors and the resolution correctly transcribed into the "minute book" by the secretary. The "minutes" when transcribed into the minute book should show what directors and officers were present and those that were absent, and should always show that a "quorum" was present. A quorum is the number of stockholders or directors, usually a majority, prescribed by the laws of the state and the by-laws of the corporation as being necessary for the holding of a valid meeting for the transaction of corporate business, and if a meeting is called and there is not a quorum present, the meeting has no power to transact any business except to adjourn to some particular time and place. A very important duty of the board of directors, which is frequently neglected and omitted, is the auditing of current bills owing by the corporation, and ordering the treasurer to make proper payment. Great evils have grown out of the practice of allowing a treasurer to audit and pay bills at his own discretion. The best regulated corporations always strictly observe this rule.