30,000 words, while the other two together total about 5,500 words). While Sidney’ s work reflects worldly wisdom drawn from direct executive experience, John’ s thesis, based more on abstract study and observation, is absorbing, reflecting an insightful understanding of the topic and sense of its direction. All three of the Weinberg works— Sidney’ s memorandum, his speech and John’ s thesis— are among the earliest treatments of the functions, status and responsibilities of directors, marking the beginning of what would later evolve into the corporate governance field.
The Weinberg works, and the thesis most vividly, reflect the zeitgeist of their era while also capturing themes that resonate today. The enduring value of the Weinbergs’ writings lies in how they transcend the specifics of their time. Revisiting this work offers a grounding perspective on the core values and principles that underpin corporate governance today.
Sidney’ s boardroom memorandum,“ The Responsibility of Directors,” was inspired by the fallout from the infamous fraudulent scheming of Ivar Kreuger. Known as the“ Match King,” Kreuger amassed a fortune by lending money to European governments in exchange for matchstick monopolies. Between 1913 and 1932, Kreuger built his family-owned company, Swedish Match, into a $ 600 million empire. Operating in 36 countries, he controlled 40 % of the world’ s match production. It wasn’ t until after his suicide in 1932 that it was revealed to be a massive deception of pyramid schemes, forged documents and inflated earnings.
The fallout included lawsuits against the directors of Kreuger’ s companies, one of which inspired Sidney’ s memorandum. The board was a who’ s who of corporate America at the time, featuring prominent lawyers and bankers( including the founder of Allen & Company, a partner in J. P. Morgan & Co. and a Boston Brahmin), leading industrialists( such as a railroad executive, a sugar tycoon and a real estate magnate) and a scion of the Rockefeller dynasty. The board sought to have the lawsuit dismissed, but the court denied their request in an opinion dated June 4, 1933.
Sidney wrote his memorandum, dated June 21, 1933, for the CEOs of the companies whose boards he served, as well as fellow directors. Sidney highlighted the importance of directors being wellinformed and actively engaged in the oversight of corporate affairs. He proposed a balanced approach, advocating that directors receive regular, comprehensive updates on company operations while ensuring that executive officers retain the ability to manage day-to-day activities efficiently. The memo underscored the need for a cooperative relationship between directors and executives, aiming to establish a code of procedure that would enhance accountability and governance within corporations.
Ironically, Sidney’ s 1949 speech was inspired by his own experience serving on the board of McKesson & Robbins amid a notorious fraud. The storied wholesale drug company, with roots dating to 1833, was sold in 1926 to Frank D. Coster, whose real name was Philip Musica. Musica’ s family were corrupt food importers who bribed dockworkers to inflate the weight of shipments. From 1909 to 1916, Philip and other family members were repeatedly arrested and jailed. After a stint working undercover for the district attorney, Musica returned to crime, including posing as president of a pharmaceutical company that fronted for a bootlegging operation. By 1926, with his name and identity changed, he seemed a respectable businessman and acquired control of McKesson & Robbins.
During the ensuing 13 years— while Sidney was on the board— Musica / Coster looted the company, stealing some $ 3 million by creating elaborate fictitious accounts. When the company treasurer finally smelled the rat, an SEC investigation resulted, finding a galactic failure not only of financial reporting but corporate governance. In 1939, Musica / Coster killed himself. It prompted reforms, beginning with the SEC’ s requirement of shareholder election of auditors, and it eventually led to board oversight through the audit committee.
Sidney’ s 1949 speech aimed to educate his fellow directors and improve board service across corporate America. Repeating and expanding on the 11 principles from his 1933 memorandum, Sidney added two more: have a company’ s chief accounting officer attend every board meeting and form a board audit committee comprised solely of outside directors to interact with the company’ s independent auditor. Sidney’ s advice was spot on: independent audit committees were eventually required for listed companies by the
New York Stock Exchange from 1977 and for all public companies by the Sarbanes- Oxley Act of 2002.
Sidney published that speech the year after John submitted his thesis, which elucidates on themes of the speech and Sidney’ s memorandum. John’ s thesis provides an overall assessment of directors, encompassing contemporary corporate governance, structured into six chapters that address such topics as corporate social responsibility and the foundations of corporate administration( including board authority, the distinction between directors’ and managers’ roles, board composition, director liability and the profile of an ideal director). The Weinberg Center is preparing a volume featuring the thesis and reflections from 30 leading corporate governance experts on it— explored through lenses of policy, history and contemporary practice.
While the thesis focuses on practical aspects of boardroom life, it also engages with fundamental debates on the purpose of a corporation and the resulting role of directors. It explains that American industry in 1948 faced a critical test, addressing severe challenges to the free enterprise system. The business corporation, as a cornerstone of democratic capitalism, held a dominating position, and the board of directors played a crucial role in its performance. Yet there was a lively debate over the conception of corporations, veering from solely protecting stockholder interests to reconciling private enterprise with the social needs of a democratic system. John was informed by the famous contemporary debate between Adolf Berle and Merrick Dodd, which the thesis explained this way:
One side [ citing Berle ] advocates an increased emphasis on the doctrine that managerial powers are held in trust for stockholders as sole beneficiaries of the corporate enterprise … The opposing attitude [ citing Dodd ] recognizes the need for protecting the stockholders against irresponsible actions of management, but this group perceives, as more important, the evolution of public opinion with regard to the social functions corporations should perform. Not only has the public become conscious of this new ideal, but many industrial leaders have also awakened to the new concept.
www. MoAF. org | Summer 2025 | FINANCIAL HISTORY 25