Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-09-29
DIRECTORS. NOT IN IT
Executive Officers Manage
Corporations,
so SAYS MR.. SCHIFF
TAKES STAND IN INSURANCE IN
CURRY.
so SAYS MR.. SCHIFF
Member of Firm Kuhn. Loeb and CONF
pany Makes Startling
Statements.

director of the Equitable Life Assurance
Society, was the first witness called before
the legislative life insurance investigating
committee today
Mr.. Schifr said he had become a director
of the Equitable society in the latter part
of 1893 or the first part of 1894. His firm
had had dealings with the society for a
quarter of a century prior to that time.
The question of the propriety of the firm
of Kuhn, Loeb & Co. dealing with the
Equitable society occurred to him, and he
took counsel upon the matter, and was ad-
vised that there was nothing to prevent
his firm from properly maintaining such
relations. He was director of the society
four or five years before he became mem-
ber of any committee of IT. Then he was
a member of the finance committee.
Mr.. Schiff stated that the position of d.
rector in large corporations in New forx
and he presumed, elsewhere was negitgi-
bic quantity. If any executive officer wisb-
ed to conceal anything from the directors
ne could easily do so, and the director un-
der prevailing conditions, is powerless to
prevent any irregularty.
Run by Executives.
Mr.. Schiff testified that the Equitable was
in the hands of the executive officers. and
he had no way of knowing more than these
executive officers chose to tell him.
He refused an election to the executive
committee because of the relations of his
| firm to the society. This, witness said, was
because he thought it would be improper
| for him as a member of the executive COM
mittee to pass upon any dealings his firm
might have with the society.
Up to a recent time Mr.. Schiff qualf-
| fed as a director by shares transferred by
Mr.. Hyde Mr.. Hyde drew the dividends
on these shares. Mr.. Schim received no
beneficial results from them. They were
retransferred to the trustees under the
I1x-o,, Mr. cail hat fArjn
to last February he was not a policyholder
in the Equitable. and was not in any diff
ferent position from many other directors
and held his position at the request OF Mr..
Hyde. He was asked to become member
os the finance committee that he could
give his judgment on the securities the So
ciety purchased. The question of propriety
did not occur to him on this point because
the finance committee does not decide the
actual purchase, but merely advises the
sale or purchase of securities The Y2iue OF
his advice in this regard witness said. was
the same as judge of a higher court, be-
cause of his experience.
His position was not one of much i'm
portanee, he stated, because he could not
insist that his Judgment be followed He
could not say it was a surprise to him TO
find that his position a member of the
finance committee was perfunctory.
Copy Of Bylaws.
A copy of the bylaws governing the
finance committee was introduced, and was
identified by Mr. Schiff. These bylaws pro-
vided for an auditing committee of five di-
rectors 10 pass upon all matters, thus de-
priving the finance committee of much of
its power A list of five names was handed
Mr.. Schiff, but he was unable to say
whether the men named on 1t composed the
committee. They were c. B. Alexander,
Valentine P. Snyder Thomas d. Jordan,
William H. Mcintyre and William AleXan-
der. Mr.. Hughes said this list was handed
him by an officer of the Equitable. subject
to correction. Witness testified that the
chairman of the finance committee annually
appointed two members to audit the So
ciety's accounts and report to the finance
committee and in that way attempted a
supervision of the society's funds.
Mr. Schiff said that there was practically
no place for the finance committee as the
executive committee took the initiative IN
all investments and there was audit
ing committee with powers equaling those
of the finance committee.
do I understand asked Mr.. Hughes,
that in corporations custom outweigs by
laws?"
Custom outweighs Law.
'Tn the Equitable this was the case,'
replied Mr.. Schiff.
Mr.. Hughes stated that he found that
W. H. Mcintyre and T. D. Jordan. menu
bers of the finance committee. had re-
ported to that committee in 1904 that they
had examined. the securities of the COM
pany and had found them correct. Mr..
Schiff said they were appointed by Mr..
Hyde, the chairman of the committee.
Mr.. Hughes said: NOW consideration OF
the facts that have been developed at this
inquiry that the Equitable accounts were
kept in the names of parties to whom they
did not belong that the funds of the So
ciety were not entered upon its books, I
want to find out what supervision was ex-
ercised. Now, | understand that the exec
utive officers had complete charge of the
society, that the finance committee dealt
with the investments and sales of securities
only after they had been made and that,
with the important power to examine the
accounts, the finance committee did moth
ing but appoint two of the executive Of
ficers to conduct the examination for
them?'
1.-The chairman in all committees appoints
the subcommittee, replied Mr.. schiff.
Checks are not necessary if all men are
honest" said Mr.. Hughes
81 have always believed every man hon.
est until l found him dishonest" said Mr..
Schin. This has always been my theory
and practice through life"
In reply to a question by Mr.. Hughes as
to whether he did not think there ought
to be more supervision of insurance COM
panies Mr.. Schiff said There is doubt
of it, but no law can secure It. Do you ex-
pect every director to have accountants at
his disposal to examine the accounts Of
every bank, insurance or trust company
Mr.. Schin said he understood that the
Equitable Society was audited only by two
of its executive officers-Mr. Mcintyre and
Mr.. Jordan, and that Mr.. Hyde appointed
them.
Said Mr. Schiff: II think he made mis- !,
take because be actually kept board of
directors absolutely at the mercy of one
man."
Mr. Schiff said he would like to see an
insurance company looked after as strictly
as his own banking firm. and its executive
officers held to as strict accountability as
his own cashiers.
During his connection with the society
Mr.. Schif said he never heard anything OF
the numerous trustee accounts, and it was
never brought to his attention that moneys
of the society were carried under accounts
in which they did not belong.
Campaign Contributions
Mr.. Hughes asked him about campaign
contributions by the Equitable society. Mr.
Schin said In reply that Cornelius N. Bliss
had told him that Mr.. Hyde had con-