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St. John's Law Review

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It is a traditional rule of corporate law that the board of directors exercises plenary power over corporate management. In fact, however, the twentieth century has witnessed a decided shift of the functional center of authority to the corporate officers. Although a basic residuum of authority remains in the board of directors, the officers, especially the president, in the majority of corporations exercise the day-to-day control of corporate affairs; In practice the modern corporation is occasionally directed by a general manager, but more often by the president (or perhaps, to use a mode currently in vogue for large public- issue corporations, the chairman of the board), who either is given express general managerial authority or simply assumes general supervision tantamount to such authority over corporate affairs. It is essential at the outset to have a clear grasp of the recognized principles of agency. The Restatement (Second) of Agency defines three categories: (real) authority, apparent authority, and inherent authority. Authority, often called real or actual authority, grants the agent the power to bind the principal in accordance with the principal's manifestations to the agent. In terms of academic theory, the question immediately arises: what relation does the inherent authority of the corporate president have to the types of inherent authority in agency above described? It is clear that each of the varieties recognized by the Restatement rests upon a policy of protection for an innocent third party who will be injured unless the requisite authority, never granted by the principal, is nonetheless imputed to the agent. But query, is this the reason for according inherent authority to a corporate president? The suspicion arises that in corporate law this authority, whatever its nature, is accorded at least to some extent to benefit the corporation rather than any third party. We shall see whether or not this suspicion is accurate in considering 1) the powers of the president to bind the corporation generally, 2) the powers of the president in the conduct of litigation, 3) the powers of the president in the conduct of litigation when there is internal corporate division.