the world of private banking

GERmAN PRIVAtE BANKS AND GERmAN INDUStRy, 1830–1938 165
railway companies and even decided to decline any invitation to join a joint-stock
company’s supervisory board in the future. 19
An alternative for those who decided to stick to their interest in industry and
transport was involvement in the client company’s management. In the case of the
Oppenheim interest in the Rhenish Railway Company, the senior partner Abraham
Oppenheim had become executive director and thus combined the position of a
director of the company and its banker. Conflicts of interest were unavoidable, and
both sides, the shareholders and the bankers, were keen to get rid of this interlocking
position. The non-bank enterprises (shareholders other than the banking interest
and the non-bank bound management) supported an independent executive board,
since a banker-director was much too powerful simply by the combination of
these two functions. As competition among banks increased, non-bank general
meetings rarely fell into such straits as to elect a banker onto the executive board.
On the other hand, when the bankers came into the position of diversifying risks
because investment opportunities became more widespread, they were no longer
in a position to spend as much time as demanded by an executive directorship.
Instead, they restricted their activities to a supervisory role. 20
After having diversified their business activities, many bankers also ‘diversified’
board representation, i.e. some of them ‘collected’ supervisory-board seats and
created a network of personal linkages between banks and up to twenty (and at
times even more) industrial enterprises. The management regarded the bankers
on the board not only as a necessity for ensuring injections of capital and credit in
case of need, but also as most valuable advisers in business and financial matters
and as sources of information on business, economics and politics. 21
From the mid-nineteenth century on, railway companies and heavy industrial
concerns grew very quickly, and the bankers’ resources, which were only
reluctantly replenished by customers’ deposits, became insufficient in relation
to the needs of big industry. This problem was realized by many bankers who
then started initiatives for getting governmental concessions for joint-stock credit
banks. The German States, however, Prussia in particular, were not at all willing
to liberalize joint-stock legislation, and, as concessions for industrial joint-stock
19
W. Treue, ‘Das Bankhaus Mendelssohn als Beispiel einer Privatbank im 19. und 20.
Jahrhundert‘, in Mendelssohn Studien, vol. 1, 1972, pp. 29–80, here p. 54.
20
H. Wixforth and D. Ziegler, ‘“Bankenmacht”: Universal Banking and German
Industry in Historical Perspective’, in Y. Cassis et al. (eds), The Evolution of Financial
Institutions and Markets in Twentieth-Century Europe (Aldershot, 1995), pp. 256ff.
21
H. Wixforth and D. Ziegler, ‘The Niche in the Universal Banking System: the Role
and Significance of Private Bankers within German Industry’, in Financial History Review,
vol. 1, 1994, pp. 99–119, here p. 104; M. Reitmayer, ‘Der Strukturwandel im Bankwesen
und seine Folgen für die Geschäftstätigkeit der Privatbankiers im Deutschen Reich bis
1914‘, in idem, Der Privatbankier: Nischenstrategien in Geschichte und Gegenwart
(Stuttgart, 2003), p. 14.