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