This section is from the "Practical Banking" book, by Albert S. Bolles.
The president is the chief executive officer of the bank, and presides at the meetings of the Board of Directors, but is not necessarily the business head or manager of the institution. Some banks have a vice-president. The vice-president in the absence of the president assumes the functions of the latter.
In legal matters the president must sign documents conveying real estate, and with the cashier must sign certificates of stock issued to shareholders, and the circulating notes. He, or the cashier, may verify the various reports required by the National Banking law to be made to the Comptroller, and must certify to that officer the payment of each installment of stock. He cannot act as proxy at meetings of the shareholders.
He is not required to give a bond to secure the bank in the event of not faithfully performing his duties, but all the officials below him give such security. It is supposed that his large pecuniary interest in his bank, and his well-known standing in the community where he resides, will prove an ample guaranty. Of course, bank presidents are sometimes recreant to their trusts, but happily not often. It is well to believe there are persons living in every community whose word is as good as their bond, and for them to give such an obligation, therefore, is superfluous.
The salary of a bank president varies from a very small sum to fifteen thousand dollars a year. When his duties are very few, and only a slight portion of his time is devoted to the affairs of the bank, no salary is paid. This is often the case.
We have mentioned that in some cases he is the real business head of a bank, and that in others he is not. The country banks, so called, by which is meant in this place, the banks outside the larger cities, are managed by the cashier. Here and there may be found an exception. In the large cities, however, the president is usually the chief business officer, going to the bank regularly, and spending his time there during banking hours. He is a hard-working officer, acquainted with all the details of the business, and interested in all matters pertaining to the prosperity of his enterprise. Occasionally the president of a city bank is a figure head, and then the vice-president or cashier is the chief business officer.
An author, from whom we shall frequently quote, has said: "It is considered desirable that the president should possess an independent income, and be free from the entanglements of trade. Engagement in other business would distract his attention from the bank, and might give rise to a conflict of interests. Under the pressure of personal embarrassment, with the means of relief in his official hands, even a rigid sense of duty might be overcome. The highest tone of sentiment on this point is, therefore, adverse to his connection with the hazards of commerce. Yet several of our most prosperous New York City banks have always been presided over by active, enterprising merchants.
"There are other reasons why a bank president should hold himself aloof from mercantile business. With large capital invested in a particular branch of trade, his views might insensibly become narrow and partial. An engrossing special interest would divert his mind from the close study of credits generally, and make his judgment less clear, as the condition of commerce becomes more critical. In a season of growing stringency in the money market, self-interest compels bank directors, in common with others, to withdraw their attention from all affairs but their own, and thus additional responsibility is thrown on the officers, particularly on the president. The discounting of paper is then less strictly confined to the sessions of the board. It is spread through every hour of the day, with specialities and importunities which can be dealt with only individually and privately."*
The truth of Gibbons' first remark has been illustrated in a startling manner on more than one occasion. A bank president ought not to be regarded morally as a very superior being. If he is engaged in outside interests of greater pecuniary or other importance to him than his bank, there is danger that he will neglect or use it for a personal end. This has happened again and again. Within a very short time several fresh illustrations have been added to those existing before.
It need hardly be said that a bank president should possess a very considerable knowledge, especially of men. It is true that many a successful bank president has had only a slight acquaintance with books, but he has understood men. To have this knowledge in a marked degree is a gift rather than an acquirement; yet the less fortunate should strive, nevertheless, to acquire by determined effort that knowledge of men which is so essential to business success,
A bank president should keep a keen watch on the movements of trade, on the strength and weakness of those to whom money is loaned, or who are likely to ask for loans, for on the sagacious lending of the bank's resources mainly depends its prosperity. Some bank presidents read the trade newspapers with great care, and search in every quarter for information relating to the borrowers of money. If a considerable number of failures occur in a particular trade they are carefully noted. A bank president told the writer a few years ago that a great deal of tobacco had been injured in curing during that year, and that he should be especially careful about discounting "tobacco paper," because he expected that a good many failures would happen among tobacco manufacturers. This is the kind of vigilance required for a bank manager. Still, however wisely he may conduct the business of discounting, risks are unavoidable, and losses will accrue.
* Gibbons' Banks of New York, p. 24.