of absolutely void—ignores the teachings of experience. To hold such contracts merely voidable has resulted practically in declaring them valid. It is the directors who control corporate action; and there is little reason to expect that any contract, entered into by a board with a fellow director, however unfair, would be subsequently avoided. Appeals from Philip drunk to Philip sober are not of frequent occurrence, nor very fruitful. But here we lack even an appealing party. Directors and the dominant stockholders would, of course, not appeal; and the minority stockholders have rarely the knowledge of facts which is essential to an effective appeal, whether it be made to the directors, to the whole body of stockholders, or to the courts. Besides, the financial burden and the risks incident to any attempt of individual stockholders to interfere with an existing management is ordinarily prohibitive. Proceedings to avoid contracts with directors are, therefore, seldom brought, except after a radical change in the membership of the board. And radical changes in a board’s membership are rare. Indeed the Pujo Committee reports:
“None of the witnesses (the leading American bankers testified) was able to name an instance in the history of the country in which the stockholders had succeeded in overthrowing an existing management in any large corporation. Nor does it appear that stockholders have ever even succeeded in so far as to secure the investigation of an existing management of a corporation to ascertain whether it has been well or honestly managed.”
Mr. Max Pam proposed in the April, 1913, Harvard Law Review, that the government come to the aid of minority stockholders. He urged that the president of every corporation be required to report annually to the stockholders, and to state and federal officials every contract made by the company in which any director is interested; that the Attorney-General of the United States or the State investigate the same and take proper proceedings to set all such contracts aside and recover any damages