MORALS IN TRADE AND COMMERCE

A LECTURE BYFRANK B. ANDERSON

President ofThe Bank of CaliforniaNational Association

DELIVERED BEFORE THE STUDENTS OFTHE UNIVERSITY OF CALIFORNIABERKELEYFebruary 15th, 1911

Under the "Barbara Weinstock" Foundation

MORALS IN TRADE AND COMMERCE

The most beautiful thing about youth is its power and eagerness to makeideals, and he is unfortunate who goes out into the world without somepicture of services to be rendered, or of a goal to be attained. Thereare very few of us who, at some time or another, have not cherishedthese ideals, perhaps secretly and half ashamed as though to us alonehad come an inspiration of a career that should touch the pulses ofthe world and leave it better than we found it. And in the making ofyouthful ideals we have changed very little with the passage of thecenturies. The character of the ideals has changed with changing needs, but not we ourselves. Our young men still see visions; they still fillthe future with conflict and with struggle and prospectively live outtheir lives with the crown of achievement in the distance. It is wellthat it should be so. The ideals of our youth are the motive-power ofour lives, and even those of us who have lived far into the eras ofdisappointment would not willingly wipe from our memories even the mostextravagant day dreams from which we drew energy and hope and fortitudeand self-reliance. 

If ideals have such a power over our lives, if they energize and directour first entry into the world of affairs--as unquestionably theydo--they must be counted among the real forces of the day and as suchthey are as much a matter for our scrutiny and control as educationaldevelopment or physical perfection. Not, perhaps, in the same way, forour ideals belong to that private domain wherein we rightly resenteither dictation or authority from the outside. But we can apply bothdictation and authority for ourselves. With a firm determination to beupon the right side of the great issues of the day, to uphold honor andjustice in public affairs, to uproot the tares and to sow the wheat inthe domain of national business, we can apply our whole mental strengthto a proper determination of those issues, to a correct distribution ofpraise and blame, to a careful adjustment of the means to the end andto a precise appreciation of the facts. We can satisfy ourselves that wehave heard both sides and that enthusiasm has not deadened our ears toall appeals but the most noisy. We can see to it that our attitude isthe judicial one and that our minds are so fixed upon the truth and uponthe whole truth that there is no room for prejudice or for passion. Allthese things can be reared as a superstructure upon the groundwork oflofty ideals, for just as there can be no progress without ideals sothere can come nothing but calamity from ideals that are not guided byreflection and by knowledge. 

Never before has it been so hard to know the facts as it is to-day. If we must give credit to the press for the diffusion of knowledgeso also must we recognize its equal power to diffuse prejudice andbias. The newspaper and the magazine of to-day are vast and intricatemachines that supply the great majority of us with practically all thedata upon which we base our judgments. The public mind and the popularpress act and react upon one another, the press setting its sails tocatch every wind of public interest and the public upon its partdemanding to be supplied with all those departments of news to whichat the moment it is specially attracted. Commercialism and competitionhave barred a large part of the press from its rightful office as leaderand molder of opinion and have reduced it to the position of a clamorousapplicant for public favor. The press, like everything else, is ruledby majorities, and in order to live it must cater to the weaknesses ofpopular majorities, it must reflect their prejudices, it must sustaintheir ill-formed judgments, and it must so sift and winnow the news ofthe day that the whims and the passions of the day shall be sustained. There are some newspapers and magazines that are honorably willing torepresent only ripe thought and unbiased judgments, but they are not inthe majority. 

What verdict would the historian of the future pass upon thecivilization of to-day if he were restricted to the files of ournewspapers for his material. It must be confessed that we of to-day, inthe hurry and tension of modern life, are hardly in a better position. Whatever we may suppose to be our attitude toward the press, withwhatever scorn we may regard its baser features, it has an effect uponour minds far greater than we suppose. It is the steady drip of thewater upon the stone that wears it away. It is the steady presentationof one aspect of human life, and that the lowest, that slowly jaundicesour view and that produces either a rank pessimism or else anindignation against evil so strong as to efface judgment and to paralyzereason. Day after day we see human nature presented in its worst aspectsand only in its worst aspects. We see fraud, cupidity, tyranny, andviolence paraded before us as being almost the only activities worthreporting. Dishonesty is offered to us as the prevailing rule of life, and we are asked to believe that the spirit of commercial oppression hasallied itself with the machinery of government for the oppression of anation. It is a dreary picture, a picture that, if faithfully drawn, would justify almost any remedial measures within human power, a picturethat by the skill of its presentation arrests attention and almostcompels belief. 

That we so seldom compare the picture with the original is one of theanomalies of modern life. And yet the original is before us and aroundus all the time, inviting us to notice that it is only the exceptionalthat is reproduced with attractive skill and that it is only theabnormal that is emphasized with adroit arrangements of line and color. Day after day we read of the sensational divorce cases, but there isnot one line of the tens of thousands of happy marriages upon which nocloud of discord ever falls. Day after day we read of the scandals ofmunicipal government, but how often do we remember the great army ofmunicipal officials who do their whole duty devotedly, courageously, unselfishly? Day after day we hear of corporation tyranny, corporationlawlessness, or corporation greed, but what recognition do we give tocorporations that obey the laws, whose operations are above censure andwho add immeasurably to the wealth of the country and to the prosperityof every citizen in it? With this constant presentation of depravity, this incessant harping upon the one string of human dishonesty, whatwonder that our visions should be distorted or that we should excludefrom our horizon almost everything but the sinister features of modernlife. What wonder that the young men and women should look at the careerbefore them through an all-pervading fog of suspicion or that the daysahead of them should seem to be filled with the struggle against auniversal dishonesty. 

It is from such illusions as this that we must free our ideals if wewould do effective work for the world and for ourselves. There are realenemies enough without erecting imaginary windmills to tilt against. Frauds, depravities, tragedies surely await us, now as ever, butwe shall be doubly armed against them if we look upon them as theexceptions and not the rule and if we draw strength from the greatbackground of human virtue and honesty. And there is such a background, unchanging, resistant, resolute, even though the limelight of publicitybe persistently directed upon the few sinister figures on the front ofthe stage. We cannot afford to lose our faith in human nature, we cannotafford to shut out the greater and the best part of life or to gaze sopersistently upon the abnormal that we can no longer see the normaland the ordinary. Let us cultivate our sense of ethical values and ofethical perspective rather than to crouch behind a shrub until it lookslike a forest. 

We are indebted to our commercialized newspapers and magazines for ourdistorted views of human life and for the cynicism that it is themomentary fashion to affect, but that is always disfiguring to the mindthat harbors it. Certainly we can get no such views and no such cynicismfrom our own experience or from personal knowledge of the men and womenwho surround us. Honesty is a more familiar sight than dishonesty. Allthe common and familiar processes of our daily life are based upon anexpectation of honesty, and if you will stop to consider for a momentyou will see that those processes could not go on without thatexpectation. And how seldom is it falsified. Sometimes of course therecomes the jar of disappointment, but the fact that there is a jar showsthat it is the exception and not the rule. However much we may talk ofguarantees and safeguards and securities, however much we may talk of abusiness method or instinct that takes nothing for granted, it remainsa self-evident fact that we must take human honesty for granted, thatwe must assume that the man with whom we do business intends to doit rightly and honorably, that he is actuated by a settled principleof fair conduct that will work automatically, and that without thisautomatically working standard of behavior all our guarantees andsafeguards and securities would really have very little value. It is theuniversal expectation of fair dealing that makes business possible and, in fact, it is this universal expectation of good behavior that makesits breach sufficiently novel to be reported in the newspapers. If fraudand chicanery and violence were the order of the day, they would have novalue as news. After twenty-nine years of dealing with human nature ina business where it is seen at its extremes--at its best and at itsworst--I believe that the great majority of men and women in businessare honest and I am certain that if this were not so, it would beimpossible to carry on business. Take the statistics of the creditinsurance business, a business that may be said to be based upon anassumption of human honesty; examine the statistics of the losses madein business and you will find that these are but a small fraction of thetotal amount involved and even this small proportion is chiefly due toerrors of judgment or to causes in which dishonesty plays no part. Askany banker how much he relies upon human honesty as an indispensablebackground to the ordinary precautions and safeguards of his business. Ask him what is his attitude toward a client whom he detects in a lie orin sharp practice, and he will tell you that he has no use for such aman. He would rather be without his business and free from all contactwith those whose natural and innate sense of honesty is lacking. Gowherever you like, and you will find the same expectation, the sameassumption of honesty. You will find that no business can be carried onwithout it. Whatever high and honorable ideals you may have formed youneed have no apprehension that they will be scorned in the businessworld or that you will have to put them away to win success. It isin the business world that they will be valued, and even the mentalequipment that you are now seeking will be less important to you, alesser guarantee of success than your sense of honor and truth andprobity. When you reach the business world--and many of you perhaps willgo into the great corporations that are now ceaselessly paraded beforeyou as wolves and as public enemies--you will find there the same kindof human nature that you find here in college, the same estimation ofprobity and of fair dealing. If you do mean or underhand things, youwill find that they are branded in the same way there as here. You willfind that manliness and integrity are the rule and not the exception, and I will venture upon the prediction that when the time comes for youto look back upon your career you will see that there has been a steadyimprovement all along the line, just as those who are already able tolook backward find that there has been an improvement since their owncollege days. But that will rest with yourselves, for the future is inyour own hands. It is for you, gentlemen, to see that moral and ethicalprogress is unbroken. 

Now let me say a word about the corporations of which we hear so much inthe newspapers and magazines and that are so persistently represented asenemies of the community and as vampires that are sucking thelife-blood of the nation. I think there may be plenty of room here forclarification of our views, and, indeed, we should all be better for itif we could give more precision to our thinking and free ourselves fromthe imputations that have been allowed to cluster around certain terms. You may be sure that I am under no inclination to defend criminality orwrong-doing or to deny their existence wherever they are actually tobe found. There are criminal corporations just as there are criminaldoctors, and lawyers, and clergymen. Wherever men are gathered togetherthere you will find a certain number who are disposed to seek theirpersonal advantage in reprehensible ways, but because some doctors andsome lawyers and some clergymen are criminals we do not attach animputation to their respective professions. We are content to say thatthere are black sheep in every flock and so pass on. But the newspapersand the magazines have seen fit to concentrate their attention uponthe criminal or the illegal acts of certain individuals who belong tocorporations and to explain those acts in a manner which often leadstheir readers to assume that the acts are an essential part ofcorporation business. As a result, the very word "corporation" has takenon a sinister meaning, and we are asked to look upon the corporationsvery much as the Rhine peasants used to look upon the robber barons whowere accustomed to swoop down upon them and carry off their flocks. Acorporation is absolutely nothing more than a partnership of individualswho prefer to do business under certain regulations imposed by thegovernment. There is no difference between the corporate and theindividual ways of doing business except a piece of stamped paper issuedby the Secretary of State. The corporation is made up of individuals whohave just the same ideas of honor as you have yourselves, who have justas much integrity, just as great a love of fair play. A man does notchange his nature just because he turns his business into a corporationany more than he changes his nature because he moves from one street toanother or from the first floor to the second. A corporation then is acombination of men that has been formed under the sanction of law tocarry out certain projects that it would be difficult or even impossibleto carry out in any other way. The men forming those corporations arejust such men as we meet in daily life, no better and no worse, andtherefore with all those normal inclinations toward honesty that we areconscious of possessing ourselves and that we are in the habit offinding in others. The fact that these men have formed themselves intoa corporation is no more significant of evil than a combination or apartnership among doctors or laborers. It is a part of the spirit of theage, an age that is called upon to do great things, to develop vastnatural resources, to feed and clothe great centers of population, andto undertake a hundred other enterprises too large for the strength ofthe individual. I should like you to think over the real meaning ofthis term "corporation" in order that you may understand that it hasno sinister significance whatever, that it is nothing more than apartnership that has registered itself under certain legal conditionsfor purposes that are laudable and honest. If you will do this, you willunderstand at once how senseless is the outcry against corporations assuch and how absurd it is that any stigma of dishonesty should be placedupon a particular form of doing business that is exactly like otherforms of doing business, with the addition of a legal registration. As I have already said, there are some corporations that break laws, or rather certain individuals who are parts of corporations and whobreak laws, just as there is a certain small proportion of law-breakersin every section of every community. But that fact carries with itno reflection upon corporations as such, and when our sensationalpublications and politicians use the word "corporation" as though itwere an alternative term for brigand or pirate they are simply assuminga public ignorance that may exist outside, but that certainly ought notto be found within a university. They are taking advantage of a nearlyuniversal disposition to believe one's self injured and are appealingnot only to ignorance, but to a low form of cupidity and of mob greed. They would have no success in their crusade against corporations as suchif there were any general understanding of the meaning of terms or ifit were generally recognized that there are thousands of corporationsin this State, and thousands in every State against whom no whisperof wrong-doing has ever been raised and who are doing a useful work, of which every individual among us is a beneficiary, directly orindirectly. Now it is not only in our definitions that we need to beprecise and to think clearly. We have already seen the need of a betterdiscrimination between the very few corporations that are accused ofbreaking the laws and the vastly greater number that we never hear of atall and that do their business as quietly and honestly as the baker orthe butcher. If lawbreaking is to be found in the business of somecorporations, it is incumbent upon us to determine just in what way thelaw is being broken, why it is being broken, what sort of law it isthat is being broken, and how much moral turpitude or public wrong isinvolved. All these factors would be determined by a judge upon thebench before passing sentence upon the meanest malefactor, and yet wefind that the public is constantly urged by the newspapers to passsentences of ruin and confiscation upon corporations as a whole, withtheir tens of thousands of innocent stockholders, without any kind ofinquiry and under the influence of uninformed passion. 

There is no department of ethics more disputed than the meaning ofabstract right and wrong, and as I am not talking either on philosophyor ethics I will ask you to accept just such commonsense definitions ascan be applied to the business world and that may be usefully employedas a working basis. Commercial morality and honesty are determined byeach community for itself in the light of its own special needs andpoint of evolution. To-day we hold many things to be wrong that weredone by our forefathers with clear consciences, and on the otherhand we now believe that many things are right that were held by ourforefathers to be wrong. There was a time when slavery did not offendthe most delicate conscience, and if we go still further back, we shallreach a time when theft was almost the only crime recognized and whenwholesale murder was a virtue. Every age had its own standards, and itwould be absurd to argue that an act was wrong if it received thesanction of the whole community. It was the communal conscience thatdetermined all problems of right or wrong, and it is still the communalconscience that gives us our definitions of morality and honesty. Here, in my opinion, is where a great part of our trouble arises. The communalconscience has changed, and some things regarded right and proper twentyyears ago are frowned upon to-day. But business methods tend to becomerigid and inelastic, and a sudden evolution of the public conscienceleaves them in the rear. Then comes a sudden recognition of thedisparity, and laws are passed to prevent the practices that formerlywent unchallenged. Usually these laws are passed in a hurry and bypoliticians who have no clear grasp of the problem. As a result the lawsare ineffective. That is to say, business, clinging conservatively toits familiar ways, finds a plan to continue those ways in spite of thelaws passed to prevent them and then public opinion, finding no relief, is angered, --not at the breaking of a law, but because the law itselfwas ill-designed and ineffective. In other words, public opinion hasfailed in its effort to force the individual to set aside his owninterests for what public opinion considers to be the interests of thecommunity. Public opinion in this country is not a steady and persistingforce, as it is in some older communities. It moves spasmodically andafter long periods of quiescence and usually under some stress ofexcitement, which prevents deliberation and therefore effectiveness. Lawbeing more unwieldy than conditions, naturally lags behind them, andwhat we have to recognize is a change in conditions and in laws and notan outbreak of lawlessness. Another evil result from the impetuous wayin which we make laws is that they are not enforced because they are notin harmony with the views of the community. The statute books of everyState are encumbered with laws passed in moments of hysteria and neverput into operation, or else allowed to lapse after a few months ofconfusion. Every newspaper in California, for example, breaks the lawevery day when it prints a news item without appending the name of thewriter, and probably we are all of us breaking laws of which we neverheard. This sort of thing brings a law into contempt and robs it of thesacredness that should attach to it. The Sherman anti-trust law, forexample, would bring the whole business of the country to a standstillif it were strictly enforced, and I believe it is not good to bringlarge and innocent sections of the community within the scope of acriminal law simply for the purpose of reaching a minute proportionwhose methods are flagrantly bad. If the Sherman anti-trust law wereenforced, it would have to be repealed at once, and I think honesttraders have a right to complain of a law that makes them technicalcriminals and is enforced only against notorious wrongdoers. The lawshould be so framed as to reach only wrongdoers and to leave honesttraders outside of even its technical scope. 

President Roosevelt was emphatic in his declaration that he intended toenforce the Sherman anti-trust act, and during the four years beginningwith 1902 his administration was active in that direction. 

In 1906 he stated: "Combinations of capital, like combinations of labor, are a necessary element in our present industrial system. It is notpossible completely to prevent them; and, if it were possible, suchcomplete prevention would do damage to the body politic. It isunfortunate that our present laws should forbid all combinations, instead of sharply discriminating between those combinations which dogood and those combinations which do evil. 

It is a public evil to have on the statute-books a law incapable offull enforcement, because both judges and juries realize that its fullenforcement would destroy the business of the country; for the result isto make decent men violators of the law against their will and to put apremium on the behavior of the willful wrongdoers. Such a result, inturn, tends to throw the decent man and willful wrongdoer into closeassociation, and in the end to drag down the former to the latter'slevel; for the man who becomes a law-breaker in one way unhappily tendsto lose all respect for law and to be willing to break it in many ways. The law as construed by the Supreme Court is such that the business ofthe country cannot be conducted without breaking it. "

But let it be admitted that there are cases where abuses exist and wheremethods of doing business that were harmless enough and even necessaryenough a few years ago are now working hardship upon the public as aresult of changed conditions. These abuses should be corrected; there isno question about that, and they will be corrected either by violentmethods that will leave behind them a heritage of bitter resentments andwrongs or by the way of a real statesmanship that will recognize onlyfacts and that will do justice by methods that are themselves just. Fora long time to come it must be the greatest of all problems confrontingthe statesmanship of our day, a problem that must try our patience andour capacity for self-government. Do not imagine that America standsalone on this perilous path of reform. All the countries of civilizationstand in the same place. All are confronted with the same conflictbetween new ideals and old methods, between the spirit of to-day and themechanism of yesterday. The problems of other countries arise from theirown peculiar conditions just as our problems arise from our conditions, but their essence, their purport, is the same. And do not imagine thatthere is any one solution that can be applied or that there is anyvirtue in the sovereign cure-alls that are clamorously urged upon usby demagogues and by reformers who are eager to reform everything andeverybody but themselves. There is no such panacea. It is to be foundneither in municipalization, nor nationalization, nor confiscation, norany of the nostrums advocated so wearisomely by sensation mongers. Thereis indeed no hope for us except by laborious study of conditions and byan infinitely cautious advance from point to point, so that there maybe no injustice, no concessions to prejudice, no incitements of classfeeling, no embittering of relations that should be cordial as betweencitizens of the same republic, whose differences are infinitely small ascompared with the well-being of a great nation. Of all the dangers thatthreaten the path of the reformer that of injustice is the greatest. Itis better even that abuses should continue for a time longer than thatthey should be corrected by injustice and by the infliction of hardshipsupon those who are wholly innocent. Two wrongs can never make a right, and wherever we find a so-called reform that is based upon injustice beassured that we are only substituting one evil for another and that ourlatter end shall be worse than the first. It would be impossible for onenow to indicate the direction in which reforms should lie, and there isof course nothing human to which reform is impossible. But it is perhapssuitable that I should indicate some of the ways that can end in nothingbut calamity, however alluringly and speciously they may be advocated. For example, there is neither good sense nor honesty in penalizing acorporation because some of its officials have done wrong. Whereverwrong has been done, the guilt is with some individual and not withthe corporation as a whole. Find out who that individual is and lethim answer to the law, but do not visit his misdeeds upon innocentstockholders who have had nothing whatever to do with the offense, who knew nothing of its commission and could have done nothing toprevent it if they had known. Remember, that a penalty inflicted upona corporation is actually inflicted not upon guilty persons but uponinnocent investors. 

Let me give an illustration of the so-called "reforms" that arerecklessly urged upon us to-day and that are to be found in operationhere and there throughout the country. I refer to the matter of streetfranchises. Now it may be true, it probably is true, that in many casesthese franchises have become of great value and that they ought not tobe granted without adequate return. But would it not be just to rememberthat when these franchises were originally granted they provided aservice that was absolutely essential to the growth of the community andthat those who obtained the franchises faced a serious risk to theircapital and practically threw in their lot with the prospective welfareof the city? It is hard to realize how serious that risk sometimes wasand how problematical were the returns. The shareholders in these streettraction corporations are spread over the population and every class ofthe population is represented in them. They invested their money in goodfaith at a time when no question had ever been raised as to thepropriety of these franchises and at a time when these franchises wereconsidered to be for the public good and indubitably were for the publicgood. And I will ask you if it is honest to use all the machinery ofthe government, all the artifices of the politician to depreciate thevalue of those franchises, to threaten their holders with confiscation, to hamper and harass them by all the ways that are open to ademocratically governed people? I say unhesitatingly that it isdishonest to do these things, and I will go so far as to say--believingas I do in the good faith of the great majority--that most of those whonoisily advocate such measures would be ashamed to do so if they wouldbut face the facts and understand what it is that they are actuallydoing and the wrong that they are inflicting upon innocent men andwomen. If mistakes have been made in granting franchises, then take careto avoid such mistakes in the future, but do not enter into a bargainthat seemed advantageous to yourselves and then repudiate it when youfind that it is not so advantageous as you thought. There is no wayto reconcile such a thing with common honesty, and it is in no waymitigated by the fact that it is done by a community and by means of avote rather than by an individual and in the ordinary small affairs oflife. We all know what we should say of the man who acted in this waytoward ourselves personally, but in advocating some of the schemes thatare now recommended to us by sensational politicians, newspapers, andmagazines we are making ourselves responsible for a dishonesty fargreater than the evils that we are trying to remedy. Let us by all meansreform whatever needs to be reformed, but let us do it with clean hands. 

Now, I think that I have said enough to justify my belief that thesegreat problems of our social life are not of a kind to be settledoff-hand by violent or radical legislation. They are not to be settledby any one scheme or by any one plan. The only way to approach them isby careful and conscientious thought, a minute examination of the factsat first hand and a rigid determination to act toward corporations andbusiness interests in general in the same spirit of unswerving honestythat you would wish to display to a comrade or to a friend and that youwould wish to be displayed toward yourselves. You will find that honestyis the royal road to success in commercial life, and it is also theroyal road to all reform in our communal life. Do not go out into theworld with any expectation that you will be required to surrender theideals that you have formed in your youth, or that you will be asked tochoose between honor and success. Those ideals will be the greatestcapital with which you can be endowed. They will attract to youeverything that makes life desirable and without them you can haveneither self-respect nor the respect of others. 

And as a last word let me recommend you not to be carried away by thosegusts of prejudice and passion that sweep periodically through thecommunity. There is a contagion in these things that it is hard toresist, and so much that to-day passes for thought is not thought atall, but merely the automatic, unreflecting acceptance of wild theoriesthat are enunciated with so much force that they seem to be almostaxioms. Your study of history will show you that the world has alwaysbeen subject to these waves of emotion, that are sometimes religious, sometimes political, and seem for the time to carry everything beforethem. We are passing through such a period now, a period of intenseunrest, of revolt against conditions that we ourselves made, againstmethods that we ourselves created and sanctioned. I advise you to lookaskance upon every movement that in the language of the day is calledpopular. Do not accept a theory or a doctrine because it is popular, but on the other hand do not reject it for that reason. Do not permityourselves to be carried off your intellectual feet by indignation or byprotest. Demand of every political theory that it stand and deliver itscredentials, and before you allow it to pass into the realm of youradoption, see to it that you understand it in all its bearings and thatyou have traced its results so far as is possible to your foresight; letthe final test be one of human justice and of honesty, and then withcourage use your power to aid in the formation of public opinion, remembering that public opinion is after all the great controllingforce. 

Transcriber's Note. 

The typographical error "resistent" has been corrected. Variations ofhyphenation from the original document have been retained.