Fifty years in Wall Street

by Henry Clews

The accounting and publicity I advocate would expose, check, and prevent the irregularities and the one-man power abuses that have ended in so many collapses. The one-man control of large corporations must come to an end. An ounce of prevention is better than a pound of cure.

Corporations, too, should show that they have souls by not neglecting the welfare of their employes. They should promote their health by giving them healthy surroundings where they work, and also by making graduated provision for old age service, or pensions in case of disability, after long service. This, or giving them a share in the profits of the business, would do much to narrow the gulf between labor and capital.

The one-man power in large corporations, with a lot of dummy directors subservient to it, should also come to an end. Dummy directors are no better than so many decoy ducks that mislead the public. They are directors who do not direct, and are not expected to direct by those in control who selected them for election. They are consequently a false pretence. No man ought to accept a place as director or trustee of an institution, or corporation, particularly in a banking, railway, industrial or life insurance company, who does not fully appreciate the responsibility of the position and the care and vigilance it demands, and intend to faithfully and conscientiously perform its duties. To intentionally become a dummy director is reprehensible, and directors in dealing with the officers of their corporations should have opinions of their own and not be afraid to express them. They are not alone responsible for their own errors or wrongful acts, but for failure to expose and put a stop to the wrongdoing of the officers or employees under their control, and they should not assume such duties when they cannot properly attend to them.

I once knew a man of very great business renown, who during the last thirty years of his life was much sought after because he possessed the qualifications necessary to make him a most satisfactory dummy or dumb director. Hence he was connected with a very large number of companies. He was a man of wealth, retired from business, and had great capacity, but it was of the avoirdupois kind. His chief qualification consisted in his always attending punctually all the meetings. He came early and stayed till the end. He watched closely to determine which way the majority vote was going and always went with it. He was never known to open his mouth, except when the luncheon was served after the directors’ meeting had adjourned. He was much lamented by corporation managers when he died. He was their favorite director, on the ground, as claimed, he gave no trouble and was perfectly satisfied with the result of every meeting. When he was handed his five-dollar gold piece for attendance it caused him to go home rejoicing. I cite him as a specimen brick among dumb and dummy directors.

Directors should make it their business to learn all that is going on in the corporations and institutions that they direct, so that they may qualify themselves to act intelligently, instead of in a blindfolded way, as is too commonly the case. They should assert their rights, and direct in fact as well as in name, but of course necessarily leaving all the details to the officers. They, too, should avoid grinding axes of their own at the expense of their companies, and co-operate with both State and Federal officials in the strict observance and enforcement of the laws, and never connive or wink at their evasion.

All these influences for the better would promote public confidence in our ways of doing business, and indirectly also contribute to the stability of our monetary position. What we greatly need is a more stable money market in Wall Street. Such erratic changes in the rates for Stock Exchange loans that we sometimes see would create a convulsion in Europe if they were possible there. But as they are not possible there, why should they be here? We are destined to ultimately become the monetary centre of the world, but that cannot be till we acquire the stability of the Old World in interest rates.

A freak money market, jumping up to absurdly high rates and then down again, is as dangerous as it is intolerable. It is inimical to the proper transaction of legitimate business, and a disturbing factor that should be made as impossible in New York as it is in London, Paris, or Berlin. What we need, among other things, to prevent it is more care and conservatism in banking circles. In the European money centres the rates for money rise and fall in response to supply and demand, just as they do here, but within narrow limits beyond which they never pass. There is no good reason why it should not be so with us.

It is to be hoped that the eminently well qualified members of the committee appointed by the New York Chamber of Commerce—consisting of Messrs. Vanderlip, Conant, Straus, Claflin, and Clarke—will reach a solution of the problem of the money market and define how far its vagaries and irregularities are owing to a want of sufficient currency, capital, or credit, or sudden and excessive demands for loans, consequent on excessive activity in speculation, or unwillingness to lend in times of distrust and panic.

In European countries monetary stability can always be relied upon; and that element of stability, which our money market now lacks, must exist here before we can command the confidence of the world as the world’s financial centre. But we are now rapidly taking steps in the right direction, and the reform movement in business and legislation can come none too soon for our national welfare. Let the good work of reform go on and prosper, for from it we shall reap an abundant harvest in the future.

There was no good and sufficiently sound reason why money, on call, should have loaned in Wall Street at rates ranging from 100 to 125 per cent. per annum—as it did in December last, when in other cities all over the country it loaned no higher than six per cent. These money spasms, while local in their actual effect, exert a disturbing and demoralizing moral influence which is far-reaching. Such pernicious activity in the money market is not natural. It is due to artificial causes and ill-regulated methods affecting our local supply and demand.