14. It is customary for the first board of directors to state by resolution in what manner the stock is to be disposed of; if subscriptions are to be received; if subscriptions are to be paid immediately or in installments. When the certificate of incorporation has been filed the subscription list is opened. This may be in book form, or a written or printed list. The following is a common form of stock subscription:—
We, the undersigned, do hereby subscribe to the capital stock of the————company, organized under the laws of the state of————in the amount set forth below, and severally agree to pay the amount of such subscription as follows:
When the board of directors shall, through its secretary or treasurer, certify that there has been subscribed——% of the authorized capital of $————, then we severally agree to pay——% of said subscriptions, and to pay a further——% on the——day of each month thereafter, until the full amount of such subscriptions shall have been paid.
MANAGEMENT OF CORPORATIONS
15. The affairs of a corporation are managed by its directors who are elected by the stockholders. A director has no authority individually to bind the company. He can only act in conjunction with other directors in regular meeting as provided by the by-laws. The acts of the board are effected by orders or resolutions passed at such meetings. The number of directors constituting the board and the number required to form a quorum is specified in the by-laws. Directors must attend meetings in person to be entitled to vote. They cannot be represented by proxy. Since it is not practicable for the directors to attend to all of the details, they usually delegate to their officers authority to transact all of the every day business of the company. In larger corporations the directors organize themselves into subcommittees as executive committee, finance committee, etc. In small corporations these committees are unnecessary, their acts being performed by the board of directors.
16. Powers of Directors and Officers. The powers of the directors are extensive and are prescribed by the charter and by-laws. The directors have the power to bind the corporation in all its dealings with other persons or corporations. The powers of the stockholders are limited to the election of the directors; but as the directors are elected by a majority of the stockholders, the power to control the corporation through the election of a board of directors who will respect their wishes is thus conveyed to a majority of the stockholders.
Being representatives of the stockholders as a body, the directors must at all times be governed by what they honestly consider the wishes of the majority. Directors have the power to make contracts with the corporation only when they are manifestly fair contracts. For example, when not otherwise provided for, they may fix a fair compensation for their services and for the services of their officers. Except in cases of actual fraud, it is for the majority of stockholders to complain of such contracts, and they have the power to remove offending directors.
Officers of a corporation are its agents and have limited powers, usually prescribed by the by-laws. When not so specified, they are prescribed by the directors. It is not always necessary that all of the powers of an officer be specified in detail. If an officer has been accustomed to perform certain acts with the knowledge and consent of the directors, his acts become binding on the corporation. The title of an office does not necessarily convey any special powers. For example, while it is customary for the directors to confer special powers on the president, his title does not make him, in the corporation's dealings with the public, an agent of higher grade than the secretary, treasurer, or any other officer.
