the world of private banking

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