the world of private banking
the world of private banking
the world of private banking
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PRIVAtE BANKS AND tHE ONSEt OF tHE CORpORAtE EcONOmy 57<br />
In taking such initiatives, <strong>private</strong> bankers were more pragmatic than visionary.<br />
Few imagined <strong>the</strong> huge development <strong>the</strong> new institutions would rapidly undergo,<br />
or <strong>the</strong> threat to <strong>the</strong>ir own position that <strong>the</strong>y would soon represent. Their main<br />
objective was to seize <strong>the</strong> opportunity <strong>of</strong> raising vast amounts <strong>of</strong> capital in order<br />
to finance large-scale investment, especially in transport equipment. To what<br />
extent were <strong>the</strong>y able to maintain a degree <strong>of</strong> control over <strong>the</strong> banks <strong>the</strong>y had<br />
created? The answer is, once again, complex. In <strong>the</strong> first place, expectations varied<br />
considerably. Take for example <strong>the</strong> <strong>private</strong> bankers who had converted <strong>the</strong>ir bank<br />
into a joint-stock company: some simply desired to cash in and retire, while o<strong>the</strong>rs<br />
were determined to remain fully in command and expand <strong>the</strong>ir business to face<br />
up to competition. Private bankers who had taken part in <strong>the</strong> foundation <strong>of</strong> a new<br />
bank expected, if not complete control, at least close supervision <strong>of</strong> <strong>the</strong> conduct<br />
<strong>of</strong> <strong>the</strong> business and a degree <strong>of</strong> strategic guidance. The chances <strong>of</strong> remaining in<br />
control in <strong>the</strong> short to medium term depended on several factors. One was <strong>the</strong><br />
size <strong>of</strong> <strong>the</strong> stake taken in <strong>the</strong> company: in <strong>the</strong> last analysis, major shareholders<br />
are in <strong>the</strong> best position to influence policy. Being a major shareholder, however,<br />
depended in turn on <strong>the</strong> ability, or <strong>the</strong> desirability, to maintain a high stake in an<br />
expanding company whose capital was regularly increased. Ano<strong>the</strong>r factor was<br />
<strong>the</strong> provisions <strong>of</strong> company law, in particular those concerning <strong>the</strong> competence <strong>of</strong><br />
<strong>the</strong> board <strong>of</strong> directors. In Germany, real influence over <strong>the</strong> conduct <strong>of</strong> business<br />
usually required membership <strong>of</strong> <strong>the</strong> Vorstand (executive board) ra<strong>the</strong>r than <strong>the</strong><br />
Aufsichtsrat (supervisory board). In countries such as Britain and France, by<br />
contrast, membership <strong>of</strong> <strong>the</strong> single board <strong>of</strong> directors was in principle sufficient.<br />
Remaining in charge <strong>of</strong> large joint-stock banks proved difficult, though not<br />
impossible, for <strong>private</strong> bankers. In any case, this was not necessarily <strong>the</strong> most<br />
desirable option and <strong>the</strong>re were few attempts at holding on to full managerial<br />
control. Barclays Bank was <strong>the</strong> most conspicuous example, with all its directors<br />
remaining active bankers. 59 Attempts at maintaining strategic control were<br />
more common and met with mixed success, ranging from <strong>the</strong> frustration and<br />
disappointment <strong>of</strong> being excluded from <strong>the</strong> inner circle to <strong>the</strong> satisfaction <strong>of</strong><br />
having a well-oiled machine at one’s disposal. Contrast, for example, <strong>the</strong> Deutsche<br />
Bank with <strong>the</strong> Banque de l’Union Parisienne or <strong>the</strong> Swiss Bank Corporation. The<br />
Deutsche bank was founded in Berlin in March 1870 to finance foreign trade.<br />
Its founders, in <strong>the</strong> first place Adelbert Delbrück, intended to run <strong>the</strong> bank from<br />
<strong>the</strong> administrative board, taking <strong>the</strong> major policy decisions and delegating <strong>the</strong>ir<br />
implementation to managing directors. However, <strong>the</strong> latter were not prepared<br />
to be treated as mere subordinates. A power struggle ensued and turned to <strong>the</strong><br />
advantage <strong>of</strong> <strong>the</strong> executive board, led by Georg von Siemens, who increasingly<br />
pushed Adelbert Delbrück to <strong>the</strong> sidelines. 60<br />
The Swiss <strong>banking</strong> Corporation was founded in 1872 by five Basel <strong>private</strong><br />
banks, in association with a group <strong>of</strong> German and Austrian joint-stock banks.<br />
59<br />
Cassis, City Bankers; Ackrill and Hannah, Barclays.<br />
60<br />
Gall et al., The Deutsche Bank, p. 118.