This section is from the "Practical Banking" book, by Albert S. Bolles.
His salary should be liberal, for nature will not otherwise produce the activity of mind and body that are essential to his duties. Besides, he must engage in no private business, and will possess neither leisure nor taste to attend minutely to his domestic expenses. No salary can equal in value the devotion of such an officer; still, extravagance is unwise as an example, and unnecessary as a stimulant. The more capable the officer, the more he will appreciate money, and instances are frequent where bank services of the most valuable kind are accorded on salaries that would be deemed unsatisfactorily small by officers whose habits are less suited for the station.
The duties of a board will rather commence than end with the appointment of its executive. Their proper duties are supervisory. Nature aids the discharge of such duties when the supervisor is distinct from the supervised; indeed, one of the most difficult tasks of a supervisor consists in restraining the undue captiousness that is natural to the position. The president of the bank, as head of the corporation, cannot perform supervisory duties too efficiently, and he may well be entitled to a pecuniary compensation therefor. He should deem them under his special charge, but not to supersede therein the modified duties of the other directors. Supervision over the manager's official proceedings will be as salutary to him as proper to the board. Darkness is proverbially unfavorable to purity, but only by reason of the concealment it creates; every other means of concealment is equally productive of impurity. A man can easily reconcile to his judgment and conscience what cannot be reconciled to disinterested supervisors: hence, if an officer knows so little of human nature as to deem supervision offensive, he is unfit to be trusted. That the supervision may be full, it must be systematic. Every director will usually attend meetings of the board in a degree inverse to their frequency, but twice a week, or certainly once, where the bank is not very small, will be as short as is compatible with a due inspection, singly, of the loans, in some regular order, that may have been granted by the manager since the last session of the board. The directors will thus learn individually whether the power to make loans has been prudently exercised; and he will learn the opinion which any of the board may express in relation to the borrowers or their sureties, especially in cities where borrowers are generally known to the board; and a manager may advantageously defer to it the consummation of many loans in relation to which his own information is questionable, or about which he desires time to deliberate. Such a deferring will often constitute a less offensive mode of avoiding an objectionable discount than a direct and personal refusal, though truly the kindest act a banker can perform, next to granting a loan, is to promptly inform an applicant that he cannot succeed, when the banker knows the loan will not be granted.
The supervision of the board must be as comprehensive as the powers of the manager. The revisions of loans will enable the board to ascertain, not merely the solvency of the bank's assets,. but whether its business is conducted without partiality, or unwholesome bias of any kind. Nearly every undue partiality possesses concomitants that may lead to its detection; for instance, an unusual laxity of security, or length of credit; with unusual frequency of renewals in a direct form, or an indirect, so as to screen the operations. A manager, properly sensitive of his reputation, and properly diffident of his natural infirmities, will be reluctant to grant loans to his relatives, or special friends; and never to himself, or any person with whose business operations he is connected. To enable directors to judge of these particulars, a regular attendance at the stated meetings is necessary; but memory alone must not be relied on, except to suggest queries, which should always be capable of solution by proper books and indexes, that must be within reach of the directors; who should habitually inspect the books, that the practice may, in no case, seem an invidious peculiarity. In all scrutinies, however, the directors should remember that in mere judgment and expediency they may differ from the manager, and he may still be right, for banking constitutes his business, while to them it is an incidental occupation. Lenity is proper even to his undoubted errors, when they are of a nature which experience may correct; but time will only inveterate bad intentions, and their first unequivocal appearance should produce an unrelenting forfeiture of his office.
The board must understand the liabilities of the bank to its depositors, bank-note holders, and other creditors; also the funds of the bank, and its available resources; so as to judge how far the honor of the bank is safe in the care of its manager. The character of depositors and borrowers are also proper subjects of general scrutiny by the board, by reason that the reputation of a bank is inferable from the reputation of its dealers; not that disreputable people should be rejected as depositors, but a bank is not an exception to the proverb which speaks " of birds of a feather;" and when the customers of a bank are generally respectable in their character and business, we may be sure that the management of the bank is at least ostensibly moral and mercantile.