This section is from the "Practical Banking" book, by Albert S. Bolles.
That the board should legislate, supervise and appoint, but not execute, occasioned probably the exclusion from the directorship that early prevailed, and widely continues, of the person who occupies the office of cashier, and who, with us, was once almost universally the chief executive bank officer. But the executive power, located, should center in only one person; a divided responsibility creating necessarily a divided vigilance. Thirteen men acting as an executive will not produce the vigilance of one man multiplied by thirteen, but rather the vigilance of one man divided by thirteen. The inspection of a picture by ten thousand promiscuous men will not detect as many imperfections in it as the scrutiny of one person, intent on discovering to the extent of his utmost vigilance; hence, large assemblies refer every investigation to a small committee, the chairman of which is expected to assume the responsibility of the examination, while the other members are more supervisors than actors. Here, again, as in most other modes which business assumes by chance apparently, our organization dictates the mode. When, therefore, we want an army of the highest efficiency, we possess no alternative but to intrust it to a single commander-in-chief; and if we want a bank of the highest efficiency, as respects safety and productiveness, we must intrust it to a single executive, under any title we please; but to one man, who will make the bank the focus of his aspirations, and know that on his prudence and success will depend the character he most affects, and the duration of his office, with all its valued associations and consequences.
If the proposed organization is the best that can be devised for a bank, the magnitude of power to be delegated is no proper argument against its delegation, but only a motive for prudence in selecting the delegate. A man of known skill and established fidelity is not always procurable for the proposed duties, especially by small banks that cannot render available a breach of the tenth commandment. But, providentially, the world is not so dependent on a few eminent men, as their self-love and our idolatry may believe. Every well-organized person possesses an aptitude to grow to the stature of the station in which circumstances may place him, and some of the most successful bankers of our State acquired their skill after they became bankers. The like principle is discoverable in all occupations, the highest not excepted. Few of our judges, generals, diplomatists, legislators, or civil executives were accomplished in their vocation before they became invested therewith. Skill is consequent in some degree to station and its excitement, though a vulgar error expects (what is impossible) that official dexterity and competence should be possessed in advance.
On the chief executive should be devolved the responsibility of providing funds to meet the exigencies of the bank; hence, he is entitled to dictate whether loans shall be granted or withheld, and the length of credit that shall be accorded to the borrowers respectively. With him rests also a knowledge of the banking value of each customer; he should, therefore, be permitted to select from applicants the persons to whom alone loans shall be granted. The responsibility should also be cast on him of making the bank pecuniarily profitable to the stockholders; hence, he will be stimulated to obtain good accounts, and to extend business to the utmost capacity that his judgment will justify. On his untiring vigilance should be reposed the safety of the capital; hence, no loans should be granted with whose security he is dissatisfied, nor any except those with which he is satisfied—even the improper negation of a loan being usually a small evil to the bank, how important soever it may be to the proposer. The Bank of England, with a capital of about (including surplus) $90,000,000, intrusts the loaning thereof to the governor alone. He has under him a sub-governor, selected from the directors, while an executive committee, designated by the board, may be consulted by him; but the committee employs itself in digesting matters for the action of the court of directors, rather than in clogging the proceedings and diminishing the discretion of the governor. All the joint-stock banks of England are organized with a like self-depending executive, under the name of general manager, and a bank organized thus to grant loans at all times, during its business hours, will present a great inducement to customers over a bank whose discounts are accorded at only stated days, and after a protracted deliberation by directors—loans being often useful only when obtained promptly. Even the due protesting of dishonored paper, and notifying of endorsers—the enforcement of payment, or the obtainment of security on debts which prove to be unsafe, will all wholesomely fall under the control of the chief executive, by reason that the vigilance of one person can control them better than a divided vigilance; and that the debts having come into the bank by his agency, his self-love is interested in their collectability. He must feel a like responsibility against losses by forgery, overdrawn accounts, the depredation of burglars, and the peculation of subalterns. To secure in the highest degree his vigilance in these particulars, he should be intrusted with the selection of all subordinate agents, even of the notary and attorneys. At least none should be appointed or retained with whom he is not satisfied. His self-respect cannot be too much fostered by the board, and no measure should be enforced, and no loans granted, which can wound his sensibility, or diminish his influence with his subordinates or the customers of the bank. The more he can thus be brought to identify himself with the bank, the more the bank will be exempt from the disadvantages which make corporations contrast unfavorably with private establishments, and which a proverb alludes to in saying that what is every man's business is nobody's. So great is the assimilation to their bank which some managers attain, that a poignancy of solicitude in relation to the debts of the bank, the preservation of its credit and the productiveness of its capital become the greatest evils of their position, especially when they are predisposed to morbid nervousness, which, with disease of the heart, their position induces and fosters. Such a man will obtain from his board all the information it can yield him in relation to the pecuniary responsibility of his dealers; and the directors should give him their opinion—not mandatory, to relieve his responsibility, but to inform his judgment, though he will soon discover that his only safe guide will consist of his feelings founded on personal observations too subtle often to be described, much less enumerated.