FORM OF TRANSFER ON BACK OF STOCK CERTIFICATE

For value received, I hereby sell, assign, and transfer, unto..

mentioned stock, and do hereby constitute and appoint..

to transfer the same on the books of the company. Witness my hand and seal, this..........

19......... Witness:

Ishares of the within

my true and lawful attorney

..day of..

(Seal)

149. Directors. In a corporation the members (stockholders) are not as such agents of the corporation. They have the power, however, to elect the directors, who are the ultimate managers of the business and who appoint the necessary active agents and officers.

Directors are elected by a majority vote of the stockholders, each stockholder usually having one vote for each share of stock he owns. It follows that if one person, or a group of persons acting together, owns a majority of the stock, he, or they, can elect all the directors. To avoid this, some statutes provide for cumulative voting. For example, if three directors are to be elected, a stockholder with ten shares may cast ten votes for each of three or may concentrate thirty votes upon one. If there are 1000 shares of stock, and the majority acting together own 740, and the minority 260, the latter by casting triple votes for one candidate would give him 780 votes, or more than the majority casting single votes for each of three could muster. Thus the minority would elect one director and the majority two. The registered stockholder is usually the only one entitled to vote. It is commonly provided that a stockholder may vote by "proxy," that is, authorize another to vote for him.

The powers of the directors are very extensive and are fixed by the charter of the corporation. The directors are, when convened as a board, the embodiment of all corporate powers except

those which must be exercised by the stockholders. They could not change the nature or the purposes of the corporation, increase or decrease its capital stock, dissolve it, or consolidate it with another corporation; these powers are vested in the stockholders. But in the management of the corporation within the limits of the charter powers the directors are supreme.

Directors are bound to exercise reasonable care in the conduct of the corporate business, and may become liable to the corporation for losses resulting from their negligence. Directors also stand in a fiduciary relation to the stockholders, and cannot secure to themselves any advantage at the expense of stockholders.

Statutes often require directors to file annual reports with some public officer, and fix a penalty for failure to do so or for the filing of a false report.

150. Officers and agents. The officers of a corporation are appointed by the directors in conformity with the by-laws. Agents, other than officers, are sometimes appointed by the directors and sometimes by an officer. The general law of agency governs the ostensible powers of such officers and agents, except that third persons are supposed to know the provisions of the charter as to the powers of the corporation itself, and perhaps the provisions of the by-laws as to the powers of the officers. Officers and agents are entitled to compensation, but directors are not unless it is especially voted by the shareholders.

The powers of the officers are usually fixed by the by-laws of the corporation. When the by-laws do not fix the powers, they may be prescribed by the directors.

The president is always a member of the board of directors, and usually presides as its chairman. He is ordinarily empowered to execute contracts, deeds, and other documents, either by general or by special vote of the directors, and is the chief officer in whom is vested the largest measure of authority. The vice president acts when the president is absent, or, in large corporations, he has some special department of the business confided to him. In large corporations there are often

several vice presidents, known as first vice president, second vice president, etc.

The secretary keeps the records of the meetings of the directors and stockholders: He is also usually the custodian of the seal of the corporation and attaches it to documents requiring a seal; he may also attest the signature of the president to contracts, deeds, etc., although this is more commonly done by the treasurer. He has charge of the transfer of the stock certificates on the books of the corporation, and may be designated as an assistant to the treasurer.

The treasurer is the fiscal agent of the corporation. He has charge of its funds, its bank account, its securities and general assets. The books are kept under his supervision. He usually countersigns the obligations issued by the corporation in the form of contracts, checks, notes, etc., indorses for deposit or collection the checks payable to it, and in general handles its money and negotiable paper.

The general manager is the chief assistant of the president, and the officer with whom persons having business with the corporation generally deal. He usually appoints the subordinate agents and servants, makes contracts for ordinary supplies and the sale of products, and conducts the routine business affairs of the concern. In the case of unusual contracts it is always best to ascertain from the president whether the general manager has authority.

As there are some contracts which even the president cannot make without special authority of the directors, such as the issuing of bonds and notes for borrowing money, the sale of corporate assets and franchises, and the like, it is necessary in cases of doubt to make sure that the act is duly authorized. It is not uncommon for a corporation to repudiate a contract upon the ground that the officer making it exceeded his authority.

151. Powers of a corporation. A corporation as such may be said to possess at the least these necessary powers and qualities:

1. To have a corporate name, as an individual has a name; but once adopted, the name of a corporation can be changed only as prescribed by law.

2. To have a corporate seal.

3. To sue and be sued in its corporate name.

4. To appoint such officers and agents as its business may require.

5. To make by-laws for the management of its business, the transfer of its stock, the calling of meetings, etc.

6. To acquire and dispose of such property in its corporate name or under its corporate seal as may be necessary to its corporate existence or purposes. The amount of real estate it may hold is often limited by law. In the absence of such express restriction, it may hold only what is reasonably necessary. It could not unless expressly authorized engage in real estate speculations.

7. To make such contracts as are reasonably necessary to carry out the purposes for which it is organized. This includes the power to borrow money, give security, and issue negotiable paper, as well as to make the ordinary contracts of sale, agency, etc. But a corporation cannot, unless expressly authorized, enter into a partnership with other corporations or with individuals; nor can it enter into a so-called "trust" in order to create a monopoly or eliminate competition.

8. In general, a corporation may engage in such business as its charter contemplates, and in no other. A partnership may engage in almost any lawful business; but a corporation has no powers except those expressly conferred or those reasonably incident to those expressly conferred. A corporation authorized to manufacture and sell machinery cannot engage in the banking business or the transportation business. Such acts in excess of powers granted are said to be ultra vires. It has been held that a railroad company could not run a steamboat beyond its terminus, though it might run one as a ferry to connect its lines. So a steamboat company could not run a railroad, though it might run a short line as a "carry" between two navigable points. Certain powers are regarded as incidental to the express powers, but these do not extend beyond the necessities of the corporate business, and are not to be so broadly construed as to lead the corporation into unauthorized enterprises.

152. Stockholders' rights. Each stockholder has these rights as against the corporation:

1. To have issued to him a certificate of stock representing his interest, and, if he is a transferee, to have the transfer entered on the books of the company.

2. To vote at stockholders' meetings. By the generally prevailing rule each stockholder has as many votes as he has shares of stock. He may exercise his right personally or by proxy. The stockholder of record, that is, the one whose name appears on the books of the corporation, is entitled to vote. although he has transferred the stock.

3. To inspect the books of the company when a demand to do so is made in good faith and for a proper purpose.

4. To participate in dividends when the same have been declared. The profits of the corporate enterprise are from time to time divided among the stockholders in the form of dividends, each stockholder getting a per cent upon the face value of his stock. If dividends are about equal to the interest upon normal safe investments, the stock remains at or near par, that is, a $100 share of stock sells for $100. If the dividends are large, the stock goes above par; if small or uncertain, the stock goes below par. If no dividends are paid, the stock may become valueless except for voting purposes and to enable holders to control the corporation.

Profits are what remains after deducting running expenses, improvements, accrued debts, interest on bonds, a fair reserve for depreciation in buildings, machinery, or other equipment, and, perhaps, a sinking fund for the payment of the bonds.

Directors have a large discretion in the matter of declaring dividends, and may add profits to capital instead of distributing them, so long as they act in good faith.

Preferred stock is that upon which it is agreed to pay a fixed rate, practically an interest rate, before any dividends shall be declared upon the common (nonpreferred) stock.

Bonds are promises to pay a principal sum with interest, and are usually secured by mortgage upon the corporate property. Bondholders are simply creditors. A coupon bond is one to