76 



CIRCULAK 10 0, U. S. DEPARTMENT OF AGRICULTURE 



of the dark-fired department, was the third largest redrier of associa- 

 tion tobacco among the officials doing this redrying in 1922 and 1923. 



The executive committee did not seem to have been aware that, in 

 1922, 24.6 per cent of the association's tobacco was redried by a con- 

 cern (the Edmondson Tobacco Co. of South Boston and Chatham, 

 Va.), in which F. R. Edmondson, a warehouseman; R. R. Patterson, 

 the general manager of the association ; and T. C. Watkins, the head 

 of the warehouse department and a director of the association, had 

 become financially interested. Nor was the executive committee 

 aware that in 1922 these officers had made substantial profits and 

 each had acquired a one-third share in the redoing plant without 

 the investment of any capital, although they had guaranteed certain 

 loans for the purchase of redrying equipment which had been paid 

 out of the first year's profits. 



As a result of redrying a large part of the 1923 crop of tobacco, 

 the redrying plant made profits of $157,760.96, and these two officers 

 of the association were able to withdraw about $40,000 each as his 

 share of the profits (i#, p. 92) and to retain equities in the company 

 of about $30,000 each. These two officers were not the only persons 

 connected with the association who had investments in plants that 

 redried association tobacco. It would appear that at least 30 em- 

 ployees of the association were financially and directly interested 

 in plants which, at one time or another, redried tobacco for the 

 association. At least three of these association officials were asso- 

 ciation directors, and one was a public director. 38 In 1922, 47.9 per 

 cent of the tobacco redried was redried in plants in which officers 

 connected with the association were interested. (Table 32.) In 1923 

 and 1924 the proportions were 44 per cent and 51.4 per cent, 

 respectively 



Table 32. — Receipts of tooacco, quantities redried, and quantities redried by 

 association officials and by Edmondson Tobacco Co., 1922-1925 



Crop 



Tobacco 

 received 



Quantity redried 



Redried by officials 



Redried by Edmondson 

 Tobacco Co. 



1922 



Pounds 

 163, 590, 000 

 180, 138, 000 

 103, 841, 000 



83, 634, 000 



Pounds 

 51, 297, 000 

 115,471,000 

 83, 384, 000 

 70, 816, 000 



Per cent » 

 31.4 

 64.1 

 80.3 



84.7 



Pounds Per cent 2 

 24,5*8,908 ! 47.9 

 50,803,214 : 44.0 



Pounds 

 12, 621, 312 



25. ,543. 873 



Per cent 3 

 51.3 



1023 



52.2 



1824 



42,889,058 : 51.4 17.988.513 



41.9 



1923 



















Total 



531, 203, 000 



320, 968, 000 



60.4 



118,281,210 I 36.9 



57, 153, 698 



48.3 



i Green weight received = 100 per cent. 



: Quantity redried = 100 per cent. 



* Quantity redried by officials =100 per cent. 



38 Directors stand in a fiduciary relation to the corporation and are held to the utmost 

 good faith in their dealings with it. They must manage its business with a view to 

 promoting the common interests, and can not directly or indirectly derive personal profit 

 or advantage from their position, which is not shared by all the stockholders. All 

 secret profits which a director receives in any transaction in connection with the affairs 

 of the corporation must be accounted for to the corporation, although the transaction 

 may also be of advantage to the corporation. With reference to special contracts between 

 directors and their associations, the cooperative marketing act of North Carolina, under 

 whieh the Tobacco Growers' Cooperative Association was formed, provides : " No director, 

 during the term of his office, shall be a party to a contract for profit with the association 

 differing in any way from the business relations accorded regular members or holders of 

 common stock of the association, or to any other kind of contract differing from terms 

 generally current in that district.*' This provision invalidates any contract of the pro- 

 hibited type entered into by a director with an association formed under that statute. All 

 the board of directors of an association formed under that act voting in favor of such a 

 contract could not authorize it, because it would be contrary to the statute. 



