Edward William Donoghue Manson

“ Directors other than the first are elected at the annual general meeting, a certain proportion of the acting directors—usually one-third—retiring under the articles by rotation each year, and their places being filled up by election. A share qualification is nearly always required, on the well-recognized principle that a substantial stake in the undertaking is the best guarantee of fidelity to the company’s interests. A director once appointed cannot be removed during his term of office by the shareholders, unless there is a special provision for that purpose in the articles of association ”

“ Then in the matter of honesty, a director must not accept a present in cash or shares or in any other form whatever from the company’s vendor, because such a present is neither more nor less than a bribe to betray the interests of the company, nor must he make any profit in the matter of his agency without the knowledge and consent of his principal, the company. ”

“ They have to carry on the company’s business, to extend and consolidate it, and to do this they must have a free hand and a large discretion to deal with the exigencies of the commercial situation. This large discretion the law allows them so long as they keep within the limits set by the company’s memorandum and articles. They are not to be held liable for mere errors of judgment, still less for being defrauded. ”

“ Upon their uprightness, vigilance and sound judgment depends the welfare of the greatest part of the trade of the country concerned. It is not to be wondered at that in view of this influence and independence of action the law courts have held directors to a strict standard of duty, and that the parliament of the United Kingdom has singled out directors from other agents for special legislation in the Directors Liability Act 1890, the Larceny Act 1861, the Companies Act 1867 and the Winding-up Act 1890. ”

“ It would give a very erroneous idea of the position and functions of directors to speak of them—as is sometimes done—as trustees. They are only trustees in the sense that every agent is. They are “commercial men managing a trading concern for the benefit of themselves and the other shareholders.” ”