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The Scotsman who
made the "P. & O."
The Story of Sir Thomas Sutherland
Head of the "P. & O.," the most famous shipping concern
in the world, with a fleet which has cost upwards of eight millions
sterling; including a reserve fund of a solid million—surely a proud
position to be reached by a Scottish lad who began life as a junior clerk,
at the age of fifteen, with no special prospects of a successful career.
His assets consisted of a clear brain,
a sound Grammar School education, and that pluck, perseverance and
determination to succeed which seems to be inherent in all youthful
Scotsmen!
This is the story in a nutshell of Sir
Thomas Sutherland, G.C.M.G.. LL.D., ex-M.P. for the Greenock Division,
founder of the Hong Kong and Shanghai Banking Corporation, the premier
financial establishment of the East, and earthly providence for the past
thirty years of the far-famed Peninsular and Oriental Steam Navigation
Company.
AN ABERDONIAN.
Sir Thomas Sutherland is descended
from a family which has for many years been settled in Edinburgh, although
he was born much further north. His father, who had been brought up to no
trade or profession, while yet a youth inherited a modest patrimony of some
few hundreds of pounds, with which he promptly set out for the Cape, in
search of adventure and wealth. In regard to the latter he was thoroughly
unsuccessful, and he drifted homewards and found his way, to Aberdeen, where
he married pretty Christian Webster, set up in business, and soon afterwards
died. It was here, in the city of granite and the salt sea wind, in 1834,
that the future Chairman of the "
P. & O." was born.
GRANDFATHER WEBSTER ADOPTS HIM.
His parents, as may be inferred, were
not blessed with a superabundance of wealth, and on the death of his father,
the youngster was taken to the house of his grandfather Webster, his
mother’s father, who brought him up. The boy was blessed in the possession
of such guardians as his maternal grandparents. Grandfather Webster had made
a sufficient fortune as the owner of a cooperage and fish-curing
establishment on the east coast of Scotland, not far from Aberdeen, and had
then retired from business. Thomas Webster and his wife were a stern,
serious, strong-minded old couple, who took a very grave view of their
responsibilities towards their little grandson, and so he passed through a
very sedate child hood. Nevertheless, he grew very much attached to his
grandparents, and throughout his ‘life has always held their memory clear.
They were typical representatives of the real old Calvinist model, but
possessed, withal, of a vast amount of true tenderness of heart, which,
however carefully restrained, was yet ever visible to the wistful eye of the
fatherless child they had taken into their home.
SCHOOL AND COLLEGE.
When he grew old enough, young
Sutherland was placed under the care of the famous Dr. Melvin, who was
reputed to be one of the finest classical scholars of the century, and who
was then the headmaster of the Aberdeen Grammar School. Here he remained
until he was fourteen, when it was decided to send him to the University, in
order that he might be prepared for the Church. It was the earnest desire of
honest old grandfather Webster that his grandson should become a minister,
but the lad himself shewed no inclination towards that career. His term at
the University was consequently cut short when he was only fifteen years of
age, and he was placed in a merchant’s office in Aberdeen, with a view to
being sent out to an uncle in America, who had entered on an apparently
prosperous career as a banker and land agent. The American uncle’s
prosperity met with a severe check, however, and as the check seemed likely
to exercise its baleful influence for some time, young Sutherland was forced
to look about for an opening elsewhere.
THE CLUE TO THE FUTURE.
One day he heard his mother and aunt
talking about a certain Mr. James Allan, an old acquaintance of theirs, who
appeared from their conversation to have flourished exceedingly in the
world, as he had become the managing director of a great steamship company
in London, and was in receipt of a large income in that capacity. Young
Sutherland thought that something of the same kind would suit him very well,
and he accordingly asked his people to write to this Mr. Allan, and try to
secure for him an opening in the company. He did not know the name of the
company, and had the vaguest idea of what the duties of the post he was
seeking would be; but the application was successful, and before he had
attained his eighteenth birthday, young Sutherland was appointed as a junior
clerk in the offices of the Peninsular and Oriental Steam Navigation
Company.
It is interesting to note that twenty
years later Sir Thomas Sutherland was the means of keeping his early friend
Allan and the other members of the Board of Directors in their seats at a
time when, owing to the critical position of the company’s affairs, they
were threatened with dismissal by the fierce attacks of angry and
disappointed shareholders.
AN UNKNOWN ANGEL.
Thus began a connection which has
proved beneficial not only to the young Scotsman, but really much more so to
the company, for Sir T. Sutherland’s great claim to recognition lies in the
fact that he not only had a large share in the development of the company,
but that his efforts proved the salvation of the concern at a very critical
period of its existence. It is probable that but for the advent of young
Thomas Sutherland, with his strong common-sense, sound business instincts
and courage, there would have been no "P. & O." to-day—or, at any rate, that
the undertaking would have occupied a much less prominent position in the
shipping world.
THE FIRST RUNG OF THE LADDER.
Young Sutherland "took to" shipping
office work as to the manor born, and in less than a year he obtained a
thorough initiation into the system of business as then conducted at the old
London coaching house which the "P. & O." had made their headquarters in
Leadenhall Street. He had a friend in the Managing Director, of course, but
Mr. Allan was not the kind of man to shew favours to incompetent employees,
however great, a personal interest he took in their welfare, and Sutherland
had to rely on his merits alone. He was eager to see the world, and to win
his spurs, and after he had been in the office for a couple of years a
vacancy arose in the company’s staff in Bombay, and Sutherland was sent out
to fill it. He was almost immediately sent on to Hong Kong, and here the
real work of his life began.
PIONEERING.
From being a junior assistant, he rose
in a few years to be the superintendent over the affairs of the company both
in China and Japan.. In this capacity he had almost a free hand to organise
the company’s business in the Far East as he chose, and he took full
advantage of the opportunity. He not only carried on the ordinary business
of the company with exceptional success, but largely extended its scope. He
opened out coasting services to such ports as Amoy, Swatow and Foochow, in
connection with Hong Kong, Canton and Shanghai, and commenced the first
regular steam service with Nagasaki and Yokohama, which were at that date
the only ports in Japan that were open to British enterprise.
Mr. Sutherland’s vigorous and
successful management of the company’s affairs in Hong Kong—which was then,
as now, one of the most important shipping centres in the world—soon made
him a power in the community in which he spent these twelve years of his
life. In association with a Mr. Douglas Lapraik, he founded the well-known
Hong Kong and Whampoa Dock Company, which is at the present day one of the
largest concerns of the kind in the world. They built docks under
arrangements with the Admiralty to admit the largest ships in the Navy, thus
creating in Hong Kong an effective naval base.
THE BANK OF THE EAST.
The most important work carried
through by Mr. Sutherland during these early years in Hong Kong, however,
judged by the wide-spreading results which followed in its train, was, in
all probability, the foundation of the Hong Kong and Shanghai Banking
Corporation, which has been for the last thirty years at the head of all the
financial establishments of the East. It was a somewhat curious set of
circumstances that led Mr. Sutherland to determine on the organising of this
undertaking. The European business community in China was entirely
dependent, at that time, on English and Indian banks, and he had often
wondered that the public spirit of the merchants there had never induced
them to start a bank of their own. He had been reflecting on the subject for
some time, when an incident occurred which brought his thoughts to a
practical issue. This was nothing other than a somewhat impudent attempt on
the part of certain speculators in Bombay to promote a Bank of China, for
the purpose of gambling in the shares, which they had mostly allotted among
themselves.
CHECKMATE!
Mr. Sutherland became acquainted with
the fact in a somewhat peculiar manner, for it was in consequence of a
request that he should hold himself in readiness to become connected with
the new institution. He set to work, however, to write the prospectus of a
bank that should be the property and concern of the China merchants
themselves. The idea was favourably received by the leading firms in Hong
Kong and Shanghai, and in a very short time the bank was started. A charter
was obtained without much difficulty, and Mr. Sutherland was nominated as
the first vice-president of the concern. He was the principal working
director during the first two or three years of the bank’s existence, and
much. of its success is undoubtedly due to the sure foundation on which it
was started, as Sutherland’s colleagues on the Board of Directors handsomely
testified when he ceased to be one of their number.
MEMBER
OF THE LEGISLATIVE
COUNCIL.
Towards the end of 1864, Sutherland
was appointed by Sir Hercules Robinson (the then Governor) as one of the
three unofficial members of the local Legislative Council. This was a
flattering compliment, seeing that Mr. Sutherland was only in his thirtieth
year at the time, and an undeniable tribute to his ability and standing in
the community. The China merchants at that time were men of immense wealth,
and were regarded almost as princes, and Sir Hercules had a very wide field
from which to choose. The young representative of the "P. & O." must have
had something noteworthy about him to cause him to be singled out in this
way. The appointment was all the more flattering as it was accompanied by a
letter from the Governor in which his Excellency stated that "the
appointment would give more satisfaction to the commercial community than
any other which was open to him to make."
RECALLED TO ENGLAND.
The authorities in Leadenhall Street
could not fail to realise the abilities of their young representative in
China, and they came to the conclusion that an officer of his proved
capacity could do better work, for them elsewhere. Accordingly, two years
later, in 1866, he was recalled home. After twelve months spent at the
headquarters of the company, Mr. Sutherland was sent on a mission of
reorganisation to the various stations of the company throughout the East.
His twelve years’ experience in China had given him an invaluable insight
into both the weakness and the strength of’ the company’s operations in the
Orient and at home, and the success he had achieved in the work he had been
entrusted with had won for him the entire confidence of his superiors.
They gave evidence of their confidence
in him by endowing him with the full powers of the Board to effect any
reforms that might be in his opinion necessary. In carrying out this
important mission, Mr. Sutherland obtained such a thorough grasp of the
company’s business in every detail that when the undertaking was
subsequently placed in serious difficulties through the great changes
brought about by the opening of the Suez Canal, he became the one strong man
on the staff who had the necessary knowledge to come forward and rescue the
concern from probable disaster.
MANAGING DIRECTOR OF THE "P. & O."
In 1872, Mr. Sutherland’s great chance
came. He was appointed managing director of the company, and never was an
important post more happily or more usefully filled. The time of his advance
to the position of managing director was the moment of the company’s most
serious adversity. The old foundations of the concern and the monopoly which
they had practically enjoyed prior to the opening of the Suez Canal had been
swept away. The difference which the construction of the Canal made to the
revenue of the company from its carrying trade may be gathered when it is
mentioned that prior to the opening of the new route the tariff for the
carriage of miscellaneous goods of all kinds from this country to China and
Australia was at the rate of from £20 to £25 a ton; by 1875 the rates for
general cargo had dropped to forty
shillings per ton!
TEN YEARS’ WORK—THEN CHAIRMAN.
Consequent on these new conditions,
the whole fleet had become obsolete, and had to be replaced with the
greatest possible speed, and the entire service had to be reorganised in
order to cope with the new situation which had been created. This was a task
which occupied several years, and was all the more difficult in that it had
to be accomplished in the face of a declining revenue and diminished credit.
Mr. Sutherland gave his attention exclusively to this work, and eventually
he succeeded in replacing the company on a firm footing. He gained the
confidence of his older colleagues not only by his administrative capacity,
but by the skill with which he defended the. policy of the Board at many of
the company’s meetings when repeated attempts were made to remove the
directors, and even to wreck the company.
So well did Mr. Sutherland serve the
company that, in 1881, his colleagues elected him as their chairman, and he
has held the position ever since.
FIGHTING THE SUEZ CANAL.
A year later Mr. Sutherland went into
another important undertaking—the struggle between the shipping interest of
Great Britain and the Suez Canal Company. At that time the grievances of
shipowners against the Canal were very real and very serious indeed. The
traffic had grown to such an extent that delays in passing ships through
were continuous and often scandalous. Accidents were frequent, and the cost
of these mishaps were piled up against the shipowners in extravagant
figures. No complaint was listened to by the directorate of the Canal and
the attitude of the staff in Egypt was one of the scantiest courtesy. The
Canal Company was, therefore, the object of peculiar dislike, for while the
service was bad, the tariff and other expenses were most onerous.
LEADER OF THE OPPOSITION.
As the Chairman of the P. & O.
Company—then, as now, the largest customers of the Canal—Mr. Sutherland set
to work to organise among the leading shipowners an opposition to
this state of affairs. The result of their campaign, in which they had the
powerful assistance of the Times, soon began to be felt in France,
where the shares of the Canal Company, which had reached a very high figure,
fell rapidly in price. The English occupation of Egypt had, of course, much
to do with the uncertainty of the French shareholder as to the value of his
property, but the shipowners here were spending money freely for the purpose
of disseminating their views as to the necessity for a second Canal which
should be under British control, and they lost no opportunity of publishing
the fact far and wide that the legal opinions they had obtained did not
support the pretensions of the Canal Company to a monopoly of the route.
A
BOLT FROM THE BLUE.
The first result of this activity
caused an outbreak of astonishment on the part of the shipping interest.
They had been freely in communication with the Government throughout, and
what then was their surprise to learn that the Government, behind their
backs, had entered into an agreement with M. de Lesseps which "gave away"
the shipping interest completely, postponed almost indefinitely the
reduction of the charges, and undertook to provide eight millions of British
money, on easy terms, for the use of the Canal Company! It is scarcely
necessary to say that this very strange agreement had to be abandoned by Mr.
Gladstone almost as soon as its extraordinary terms became publicly known.
SIR THOMAS ENCOUNTERS LESSEPS.
The Government which had blundered so
badly could think of no better way of meeting the grievances of the
shipowners than to invite M. de Lesseps, the constructor of the Canal, to a
Lord Mayor’s banquet, with a view to his settling the difficulty himself.
After the banquet, M. de Lesseps and his son made a sort of triumphal
progress through the provinces. As they carefully ignored the Shipowners’
Committee in London, however, no result followed, except that the shares in
the Canal continued to droop, and matters stood at a deadlock.
When Charles de Lesseps returned to
London, however, he came to the conclusion that he must try another policy,
and he accordingly sent word, through Sir Rivers Wilson, that he would like
to have an interview with Mr. Sutherland. The meeting took place
immediately, and lasted about five hours. A basis of agreement was there and
then arrived at for an alliance between the Canal Company and the shipping
interest, and meetings were subsequently arranged to take place between
representatives of the various lines and M. de Lesseps. These took place
soon after at the offices of the "P. & O.," and lasted many days, for the
details of the proposed arrangement were not very easily settled. At length
an agreement was signed which involved a complete revolution in the
relations between the Canal Company and their customers, and the change for
the better that took place was extraordinary—so much so that scarcely a
complaint has since been made on the part of the British shipowners.
ON THE CANAL BOARD.
At the same time, in spite of the
reduction in the rates granted to the shipping interest, and the other
concessions, the profits of the Canal Company have grown in such a manner
that the shares, which had fallen below £70 at the time the agreement was
made, now stand at something like £150. The effect on the shares owned by
the British Government must have been to increase their capital value by
nearly sixteen millions sterling. Mr. Sutherland was, of course, asked to
join the Board of the Canal as one of the seven British commercial
representatives, and was nominated by his colleagues as the chairman of the
London Consultative Committee, which advises on all matters common to the
interests of the Canal and shipping. These offices he still holds.
THE "P. & O." TO-DAY.
How closely Sir Thomas Sutherland—he
was knighted in 1891, and received the Grand Cross in 1897—has been
concerned in the development of the P. & O. Company may be gathered from the
fact that when he first became responsible for the direction of affairs the
fleet owned by the Company consisted of an aggregate of 100,000 tons; its
tonnage to-day is little short of 350,000, and it constitutes the greatest
as well as the most costly fleet of vessels under the British flag. The
share capital has even been reduced, and now stands only at £2,320,000, and
there has also been an issue of debentures to the amount of £800.000. The
company, which insures its own ships, possesses a reserve fund of a solid
million sterling. Sir Thomas is a man of many activities both inside the
walls of the P. & O. Company’s office, and elsewhere. For nearly twenty
years he sat in the House of Commons as Member for Greenock. He married, in
1880, Miss Macnaught, the charming daughter and heiress of a wealthy
clergyman, and rejoices in two sons and a daughter. The elder boy is at
Sandhurst, and the younger is still at Eton. Sir Thomas has a delightfully
romantic country place near Liss, in Sussex, close by the Hampshire border,
where he now spends most of his leisure. He has deserved well of his
country, for few men have done more, in a characteristically thorough and
unostentatious manner, to develop British trading interests and to organise
the bloodless victories of commerce.
HIS DEATH
1834-1923
 The
death of Sir Thomas Sutherland at the age of 87,
removes a noteable figure who in his day had
done great work. For 40 years, as managing
director and then as chairman of the P. and O. Company, he took a more
active part than probably any other man of his time in the expansion of that
network of communication with both the Far East and Australia which has
exercised so important an influence on our commerce and our Empire.
He died at the age of 87. Sir Thomas
Sutherland sat for Greenock first as a liberal and then as a Liberal
Unionist from 1881 to 1909. He was a member of the Load Line Commission
which sat in 1882, and a member of the Royal Commission on the Financial
Relations between Great Britain and Ireland. In addition, he was a director
of the London City and Midland Bank and of the Bank of Australasia, and
chairman of the Marine and General Assurance Society. He was, too, a Knight
of the Legion of Honour and of the Order of St. John, and one his Majesty's
Lieutenants for the City of London. He married, in 1880, Alice, daughter of
the Rev. John Macnaught, vicar of St. Chrysostom's, Liverpool; she died in
1920, as did also his two sons, one killed in the South African campaign and
the other during the Great War.
But for increasing deafness Sir Thomas
retained all his facilities, and was a regular visitor to Paris, where he
had many friends. In the dark days which overtook the de Lesseps family
owing to the Panoma collapse, he never wavered in his friendship, and it was
mainly owing to his good offices that Count Charles de Lessep resumed his
position on the board of the Suez Canal Company.
THE PROVISIONAL COMMITTEE AND THE
FOUNDING OF THE HONGKONG BANK, 1864—1865
Notwithstanding the very extensive
foreign trade with China and Japan [the Hongkong and Shanghae Banking
Company (Limited)] is the first Bank locally started or in which the
majority of our Merchants are directly interested ... the chief inducement
which the promoters had in view was to supply an absolute want arising out
of inability of the Branch Banks established here to meet the varied
requirements of local trade. This trade implying the business between Hong
Kong and the open ports in China and Japan is now of the most extensive
character and requires a more special mode of dealing than any Bank Agency
can possibly supply.
In this respect the promoters of the
Hongkong and Shanghai Bank believe that from the experience of its Directors
and the sources of information at their disposal arising from the fact of
the proprietors being connected with every branch of trade in this country,
they will be enabled most materially to aid the legitimate working of
business.
Francis Chomley, Chairman, Provisional
Committee
With this clear statement of intent,
the Chairman of the Hongkong Bank’s Provisional Committee applied to the
Governor of Hong Kong in December 1864 for a charter of incorporation. This
was to be the fulfilment of plans many times considered and many times
abandoned. The cause of the new resolve was on board a P&O mail steamer
which, on July 22, 1864, had sailed into Hong Kong and changed
banking history.
News from Bombay
The Hong Kong Superintendent of the
Peninsular and Oriental Steam Navigation Company, Thomas Sutherland, had
boarded the mail steamer Singapore in from Bombay. The formalities
concluded, Sutherland, no doubt with a hospitable word, was about to
disembark when the Captain motioned him to the cabin. There was news from
Bombay.
The news concerned a ‘local’ bank even
then in the process of promotion in Bombay. What made the news exceptional
was that this bank, the Bank of China, was to have a head office in Hong
Kong and finance regional trade between Hong Kong and the treaty ports of
China and Japan.
The merchants of Hong Kong would
understand the need — indeed, none
better. This was ‘an idea which had frequently been talked up here for
discussion and as often dropped for want of someone to push
it’. And now, in the privacy of the Captain’s cabin,
Sutherland was to be told the news first —
a Bank of China floated in Bombay to do just those things
which the Hong Kong merchants had so often, talked of. Here was the
opportunity for a speculation, to be among the first subscribing to the
shares of the proposed bank which would, even before allotment, fetch more
than 70% premium. Sutherland knew enough of Bombay to
recognize this possibility; he knew that to be allotted shares was to be
assured immediate gain — the
stags would benefit; they could sell almost immediately to considerable
advantage.
There was an alternative, although not one which the
ordinary shipping agent might consider. But then, as his subsequent career
proved, Sutherland was not an ordinary agent. He would become, at the age of
fifty, the Chairman of the P&O, but first he would found the Hongkong and
Shanghai Banking Corporation.
Sutherland’s immediate reaction to the news from Bombay
was critical of his Hong Kong friends —
‘I thought they would deserve whatever fate might befall
them.’ Fortunately, he reconsidered.
In addition to its regular cargo, a coastal steamer, like
a floating doctor’s waiting room, apparently carried collections of ageing
magazines. In 1864 while on a voyage by the SS Manila between Hong
Kong, Swatow, Amoy, and Foochow, Sutherland had come across an article in a
twenty-year-old edition of Blackwood’s Magazine on the advantages of
Scottish banking. On the basis of this he concluded that founding a bank on
Scottish principles would not be difficult. Recalling this article and
recognizing that the founding of a local bank had now become a matter of
urgency, he decided to fill the want complained of; he would be the one to
‘push’ the establishment of a local bank.
Given the competitive nature of the Hong Kong mercantile
community, perhaps only a man standing outside it, but serving it, could
have overcome the rivalries and suspicions of the independently minded
merchants and pushed such a project through. Against the background of the
traditional rivalry between Jardine, Matheson and Co. and Dent and Co.,
between Russell and Co. and Augustine Heard and Co., there were the new
rivalries stemming from the promotion of rival docks, rival insurance
companies, rival shipping firms. Now more than ever they needed banking
facilities, but under whose control, and for what purposes? Sutherland was
not a wholly innocent bystander; he was sufficiently involved to lend
credibility, independent enough to command respect.
To be successful, a local bank would have to meet the
diverse needs of the community and gain constituents from rival firms
because it promised to serve them all. It would need to become the main
depository of local funds; firms would have to open their own treasuries and
deposit their silver bars and sycee with the new bank. The local bank would
then extend credit. . . but
to whom, for what purposes, and under whose control?
But if the merchants watched each other closely, they
were also proud of Hong Kong. When they heard of Bombay’s Bank of China the
‘news caused considerable talk and excitement. . .
as it was thought to be cheeky’.
If this were a merchant’s view, the local press,
commenting on the recent past, was more outspoken.
Thus it came to pass that a few
enterprising Parsees and Scotchmen in Bombay invented and achieved so many
banks in China. They had little money but they had eyes in their heads and
sense too. They saw a clear field before them with a lot of small donkeys
browsing on it, and they turned it
to pretty good account.
The writer was perhaps thinking of the Agra and United
Service Bank, the Bank of Hindustan, China and Japan, the Commercial Bank
Corporation of India and the East, the Asiatic Banking Corporation, and the
more firmly established Oriental Bank Corporation and Chartered Mercantile
Bank of India, London and China. These, however, were exchange banks
extending their Indian based business to China and thus, it could be argued,
offering credit on competitive terms with little risk to the independence of
the local merchant.
Now, however, came the Bank of China to be a ‘local’
bank, to hold the government accounts, finance local industry, to be to Hong
Kong and Shanghai what the Presidency banks —
the Bank of Bengal, for example
— were to their respective Indian
regions. The Hong Kong community was once again, it seemed, unable to take
the initiative. Soon, it was promised, a Neale Porter,
emissary of the Bank of China, would visit Hong Kong to recruit directors,
line up business, and accept subscriptions for the few shares which the
Bombay promoters had graciously reserved for the China-coast.
The formation of
the Provisional
Committee
The editorial cited had been inspired by the prospectus
of the Bank of China published in the same paper on July 28, 1864. But
Sutherland had ‘pushed’ and the Prospectus of the Hongkong and Shanghae
Banking Company Limited together with a list of the promoters was published
in the China Mail that same day. The shipping lists indicate that the
last Bombay mail steamer must have arrived on July 22,
giving a maximum of five days for the rallying of the leading merchant
houses and undertaking the preliminary work necessary for the founding of a
$5 million bank.
But that is not, in fact, quite what happened. Sutherland
worked fast, but he was also realistic.
On July 27 Albert Farley Heard,
managing partner in China for the American trading firm of Augustine Heard
and Co., was writing a letter to Charles A. Fearon, his former partner in
London and a director of the Asiatic Bank, about the firm’s connection with
this newly established exchange bank. In passing he mentioned that:
A bank is being started here to compete with outsiders,
Hong Kong and Shanghae Banking Corporation or some such name. I am urged to
be one of the provisional committee with Chomley, Maclean, Lapraik,
Sutherland and others.. . nothing yet is settled
and I don’t intend to take a very prominent part in promoting it.
The following day, after the publication of the
Prospectus, Heard wrote in a different tone to his formidable uncle and
founding partner, Augustine Heard, Sr: ‘Today I see my name down on a Bank
committee started here rather suddenly after having been taken up and
dropped several times.' After a further day’s reflection he wrote to his
brother John:
The appearance of the Bombay [Bank of China] prospectus
stirred up those interested in the Hong Kong scheme and in consequence the
Hong Kong scheme has been put forward hastily in a prospectus concocted by
Pollard and Sutherland in the last 48 hours. I have never favoured the
scheme save in a very general way and when applied to for my name on the
Provisional Committee! did not refuse it nor did I agree to it. !n fact I
was, I confess, rather taken by surprise this morning to see it all in
print, my name on the list. . .
With his colleague George B. Dixwell in Shanghai, Heard,
writing on the eve of the first meeting of the Provisional Committee; was
even more explicit:
The first time I saw the prospectus it was in the paper.
I had not given consent for the use of my name but hesitated and did not
decline, supposing it would be open for discussion after the mail. [E.H.]
Pollard however rushed the matter thus in order to have it go to India and
check mate a plan originated in Bombay for a Bank of China to come on here
for just that purpose and object which the Hong Kong bank intends to fill.
The tone of these letters may be partly explained by the
fact that the Heards already were involved in several joint-stock companies
and consequently reflected A.F. Heard’s concern that his distant partners
might not approve of his involvement with yet another promotion, with the
‘locking up’ of funds, or with prejudicing the firm’s relations with their
already established banking connections, for example, the Comptoir
d’Escompte de Paris and the Asiatic.
But the confession that ’I did not refuse.
. . nor did I agree’, correctly reflects the
mercantile attitude which Sutherland had to overcome. He achieved his goal
by presenting publicly an apparent fait
accompli — ‘apparent’ because the
published members of the Provisional Committee did not, in fact, meet and
declare themselves so until August 6. Heard would seem to be indignant as to
the way the matter was rushed and cautious as to his future role. His real
attitude is pride that the ‘house’ had been approached as the representative
American firm in China and resignation to the inevitable
— with just the hint that he might yet make something good of it all.
That none withdrew is a comment on Sutherland’s correct
reading of the situation. Public sentiment was at last behind the scheme and
those who for so long had discussed it and set it aside had now been
committed to a responsibility they found difficult to evade, and once
committed they did not, be it said in fairness, attempt to do so.
There is a tradition that the Hongkong Bank was founded
at a dinner party. There may well have been a dinner at which the
participants were unaware they were founding a bank. Sutherland took the
sense of the conversation and published the Prospectus without further
consultation. Or, if this is being too charitable to the story, something of
the kind must have occurred — the known facts are
not in substance much different from the legend.
!n his own account Sutherland states that he wrote up a
draft prospectus overnight, took it to his legal adviser, E.H. Pollard, and
together they solicited support. They moved so rapidly, indeed, that the
Hongkong Bank Prospectus, which had to be drawn up ab initio, was
published on the same day as the Bank of China prospectus, which had arrived
in Hong Kong fully prepared. Heard writes of a 48-hour period, and certainly
the maximum, given the arrival of the P&O steamer Singapore on the
22nd and Heard’s knowledge of the project on the 27th, would seem to be but
four days.
There is, however, a limit to credibility. How could the
P&O agent, however brilliant, design a successful banking project in so
short a time? What in fact did he achieve; what was the ‘Prospectus’?
The Prospectus was neither a charter nor a deed of
settlement, but was rather a general statement of intent. As such it
reviewed the history of the scheme, stated the overseas direction of the
existing bank branches, and gave a positive description of the proposed
Hongkong Bank as a local bank concerned with the finance of local, that is,
Hong Kong, Shanghai, and inter-port, business, adding, ‘[Experience] clearly
shows that the largest profits are obtained by those Public Companies which
possess an interested local body of Proprietors and Shareholders whose
support naturally forms a chief element of remunerative success.’
‘The Bank’, A.F. Heard was to write shortly afterwards,
‘would succeed because of its local support.'
Whatever other argument the promoters might put forward
— the ending of the compradoric system, the reform
of the currency, the encouragement of local business as opposed to exchange
operations — the key to the Bank’s success lay in
its local support. While this was to be true in the long history of the
Bank, its immediate relevance was as a counter to any claim the
Bombay-promoted Bank of China might have to a legitimate role on the China
coast.
The language of the Prospectus suggests that either
Sutherland or Pollard had access to comparable documents and, not
surprisingly, to that of the Bank of China itself. Both prospectuses make
comparison between the Presidency banks and the proposed China-coast bank;
the Hongkong Bank adds a legitimate comparison with the local Australian
banks. The Hongkong Bank Prospectus does contain specific reference to
conditions in Hong Kong, confirming that this was not merely a flash
reaction but was the promotion of an enterprise ‘in contemplation for a very
long time’.
At some point in the early negotiations a necessary but
potentially dangerous decision was made.
Sutherland’s advantage was his standing outside the
mercantile community, but the prospective bank needed a base, a sponsor, to
move it beyond the realm of a vague promotion to the immediate semblance of
organization. Thus it was that the Prospectus was signed, not by Thomas
Sutherland or indeed by any individual, but by the leading British merchant
house of Messrs Dent and Co. In a community where the managing agent system
had already developed, there was a danger that the bank might become the
creature of— or at least be dominated by — a
powerful company and, by this association, find itself opposed by the major
hongs while at the same time losing the support of smaller companies and
individual entrepreneurs.
The opposition from the rival hong of Jardine, Matheson
and Co. materialized immediately, primarily in the form of legislative
opposition to the proposed companies ordinance.
As it happened, the Provisional Committee by chance or
instinct kept their new bank relatively independent, while the failure of
Dent and Co. in 1867 removed the danger at a critical point.
If the bank’s base were to be British in a British
colony, the choice was Dent or Jardine Matheson, and, by approaching Dent’s
first, the promoters put Jardine’s in opposition. But there may have been
little choice. Jardine’s banking aspirations were well-known, and it may
have been that Dent’s, already detecting their own weakness, felt they had
more to gain than lose from sponsoring a banking institution.
In accepting this traditional assumption, based as it is
on the well-known rivalry of the two British hongs, there is a danger in
overlooking the competition between Jardine Matheson and other firms
interested in the Indian trade, especially Messrs D. Sassoon, Sons and Co.,
but including also P. and A. Camajee and Co. and P.F. Cama and Co., all of
whom signed the original Prospectus. The role of the Sassoons will be
considered further below.
With the Prospectus and the organizational sponsorship
determined, Sutherland and Pollard solicited support. Since they were
willing to accept an equivocal response as sufficient authority to include
the name in the published list of the Provisional Committee, this should not
have been difficult. Thus the timing is sufficiently explained, and the
focus must now be on the organizational activities of a committee formed
under such exceptional circumstances.
The members of the Provisional Committee and their
priorities
The Provisional Committee gave first priority to getting
started. This, as it turned out, was to be another key to success, a
principle which might be described as taking responsible action and
formalizing it afterwards. The Bank opened for business on March 3, 1865,
but the formalities of its incorporation were not concluded until July 1867.
The Bank established agencies and branches, on the basis of cautious
business assessment, as required and in good faith; certain of these actions
did not receive full legal recognition, however, until the revision of the
Bank’s ordinance in 1889. The problem was Treasury misinterpretation of the
doctrine of extraterritoriality as it applied to the acts of a colonial
legislature. This the promoters and directors of the Bank could not be
expected to foresee. And, in fairness to Colonial Office and Treasury
officials, virtually from the time the Bank’s initial request for a charter
reached the Treasury in London, these civil servants accepted that they were
dealing not with a speculative promotion but with an operating bank. This
official attitude — the Bank has done what it
ought not to have done, but how can the problem be corrected without
damaging either the Bank or its constituents —
would prove decisive throughout.
The Hongkong Bank was to be a local bank. To ensure this
three policies were pursued: (i) there had to be broad local representation
on the Board of Directors, and, before that, on the Provisional Committee,
(ii) there had to be local support through a proper allocation of shares,
and (iii) the Board of Directors had to be located where the Bank operated.
By ‘local’ the Bank’s supporters did not mean Hong Kong
only, but Treaty-Port China and Japan. The stress was on China, and the
Shanghai branch was to open virtually simultaneously with that in Hong Kong;
there was to be no ‘chief’ manager, and the Shanghai Manager would operate
under a local committee. As the Bank evolved, it is true, direction devolved
to Hong Kong whose Manager became ‘Chief Manager’ in 1868 and the committee
at Shanghai disappeared; nevertheless, the Shanghai Manager retained access
to the Board of Directors and he and the Hong Kong Manager were in a sense
partners, the former would as the years passed be in control of the Bank’s
resources in China, the latter would control the world-wide distribution of
the Bank’s staff and funds. The Hong Kong Manager would become the ultimate
arbiter under the directors; he would be the ‘chief’, yet the Bank would
remain both a Hong Kong and a Shanghai institution. Development in Japan
would be significant, but the Bank was primarily China-oriented.
To be successful the Bank’s promoters had to be
representative of or acceptable to potential constituents. Who then were the
members of the Provisional Committee?
There was the founder, (Sir) Thomas Sutherland
(1834—1922), who was to become MP for Greenock (1884—1890), GCMG, chairman
of the P&O in 1884, then chairman, London Board of the Suez Canal Company
and a director of the London, City and Midland Bank. In 1864 he was
Superintendent of the P&O —and one of his major
customers would be D. Sassoon and Sons — and in
1865-1866
he was a member of the Hong Kong Legislative Council. Without him there is
no reason to suppose the Bank would have been started. Already active in the
economic life of Hong Kong, in 1863 Sutherland had become the first chairman
of the Hongkong and Whampoa Dock Company and in this venture was closely
associated with Jardine’s and Douglas Lapraik. Yet he would, in establishing
the Provisional Committee, prove equally able to win the confidence of
Francis Chomley of Dent’s and A.F. Heard of Augustine Heard and Co.
The credit for leading the Committee
through the initial complexities must go to the man unanimously elected
Chairman, the Hon. Francis Chomley, senior partner in China of Dent and Co.
Dent’s were at the time agents in China for the Scinde, Punjaub and Delhi
Bank, but this would appear to have had no impact on their role in the
founding of the Hongkong Bank.
Dent’s prominent role did not lead to
the eclipse of Sutherland; there was no crude takeover from an inexperienced
initiator, for indeed Sutherland, who remained influential in matters
affecting the Bank, was to be elected Deputy Chairman of the Bank until his
departure for Shanghai in April 1866,
defacto
acting Chairman of the Bank during Chomley’s absence from
May to December 1865, and member of the Board until his own departure from
China in November 1867.
The success of the Hongkong Bank,
however, undoubtedly rested from the first on the broad international base
of its directorate. This was a British bank in a British colony on whose
founding committee eight of the fourteen members were not from Britain, and
which, for some four months in
1875, was without a single British director. In 1864 the goal was to develop
the China trade and the Treaty Ports; there was room for all, not the least
for German traders from the Hanseatic City of Hamburg or for American
merchants from Ipswich, Massachusetts, with long-standing China connections.
Thus on this first Provisional Committee
Siemssen and Co. and Augustine Heard and Co. were
represented, and they would soon be joined by Wm Pustau and Co. and other
German companies and by Russell and Co., the senior American firm in China.
In addition, Helland was Norwegian, and Schmidt was apparently German.
This tradition lasted until 1914. The
American companies which had participated in the Bank’s early fortunes had
by then left the China coast. The Germans, however, remained until the Great
War not only forced their removal but challenged the basis for the Bank’s
early success — its open
accommodation to merchants of all nations. For a time the Bank yielded, but
the logic of commerce on the China coast forced the Bank back to its
historical role even during the constraining times of the inter-war period.
The German connection would in time of war be misunderstood —
a problem inconceivable as Sutherland and
Pollard made their rounds in 1864.
There were five British trading
partnerships represented on the Provisional Committee. The manager of the
Borneo Company, Wm Adamson, who had a long career in Singapore and Siam (he
introduced Anna to the King of Siam), and Douglas Lapraik, a vigorous and
independent entrepreneur, completed the British contingent. Lapraik, who was
an early settler in the Colony, had begun his career as a watchmaker and the
metamorphosis by which he became a shipbuilder, the owner of a shipping
service on the China coast, the promoter of dock companies and the owner of
the baronial Douglas Castle at Pokfulam on Hong Kong Island is told in
Austin Coates’ study of the Hongkong and Whampoa Dock Company. Here was a
man who, like A.F. Heard, represented the new spirit of development in Hong
Kong. They would provide stimulus to the Bank, but their requirements would
need to be controlled. See
the web sites of the companies:
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