the banking department because the Michigan Trust Company Law does not permit trust companies to exercise the ordinary banking functions. This illustrates the first point made above, that titles of departments performing similar services are not uniform as between different trust companies. Second Example In Pennsylvania trust companies are permitted to perform banking functions, and one of the large trust companies of that state presents the following organization classification of services: 1.-Banking Department 4.-Trust Department 5.-Real Estate Department 6.-Corporate Trust Department 7.-Other Services Department The Trust Department in the case of this institution includes principally trust services for individuals but it also includes "financial agent for corporations." The Corporate Trust Department handles the corporate trust and agency services. A special department called the Real Estate Department is organized in this institution to handle trusts and agencies dealing with real estate, either through the Trust Department, or directly with clients. Tax information and investment information services are offered by this company through an Other Services Department. Thus is illustrated the differences in scope of departments as between different trust companies. Third Example A third example is an extreme illustration, where a Maryland trust company is organized into only three departments: 1.-The Investment Department 2.-The Trust Department 3.-The General Department Here the titles are unique and likewise the scope of services is distinctly unusual. The Investment Department "handles all investment matters of the company for all other departments." The Trust Department includes not only personal trust business, but also three administrative divisions-auditing division, cashier's division and administrative division. The General Department performs the safe deposit and storage services, corporate trusts and agencies, and handles custodian accounts. The Analysis of Organization Classifications of Service. departments of service which will be offered by a given trust company being determined largely by the class of business available in the community, the trust company doing a business in a small community will not require subdivisions in the trust department at all. In the large cities the trust department may be subdivided into two or three or more separate departments of service. In the process of growth from a small to a large trust company, the evolution of the existing departments is empirical and is not always amenable to rational development. For example, here is a small trust company in a rapidly growing community whose trust business consists of a few trusteeships of municipal and other corporate bond issues, a small volume of executorships, trusts, etc. The development of the community creates demand for escrow services in connection with the increasing real estate business and this business is thrown into the trust department. One type of service after another of a fiduciary nature is demanded, and, as they develop, are turned over to the trust department. There comes a time when the organization becomes unwieldy and it is decided to subdivide the trust department. What will determine the method of this subdivision is not a rational consideration of types of services performed, but that type of service or group of services which has grown to greatest volume will be separated from the trust department. It may be that it is the real estate business in connection with escrows and agencies, and thus will evolve the two departments: 1.-Trust department. 2.-Real estate department. Or the second department may be called "Agencies and Escrows. The latter title would maintain the fiduciary character of title for the department but would lack the "selling" significance which attaches to the title "Real Estate Department." As time passes, and the community grows and the trust business of the company increases, it may finally evolve the classification which is indicated for the Pennsylvania company above (second example), namely, the classification of services into 1.-Trust Department. 2.-Real Estate Department. 3.-Corporate Trust Department. 4. Safe Deposit Department. Sometimes the corporate trust department is called simply "The Corporation Department," and in the case of the Maryland company whose classification is given above (third example), the corporate trusts are handled by "The General Department. Rationalistic Organization Classification of Services. So much for the empirical method of attempting to evolve an organization classification of trust company services. Although it has been pointed out that by their very nature the organization type of classification is not amenable to rational treatment, an interesting and creditable attempt has been made to reduce the organization classification to such a basis: 1 1.-Banking Department 2.-Service Department a. Financial Bureau b.-Real Estate Bureau c.-Secretarial and Tax Service Bureau d.-Publicity and New Business Bureau g.-Maintenance Bureau (maintenance of office and equip ment) 1 Leaf, Erle M., "Internal Organization of Trust Companies." Journal of the American Bankers Association, Vol. 13 (July, 1920), pp. 7-12; and by the same author, "Plan of Internal Organization Adapted to Large and Smaller Trust Companies and Trust Departments." Trust Companies, Vol. 30 (June, 1920), pp. 536-44. Mr. Leaf was chairman of a special committee to study and report an efficient plan covering internal organization of trust companies and trust departments appointed by The Trust Company Section of the California Bankers Association in 1919. 3.-Trust Department a.-Court Division b. Corporate Division d. Securities Division The intention was to make a rational classification of services-"It was agreed that the proper method of classification of trusts was with regard to the dominant feature or the ultimate purpose of the trust. . . .” 1 But the classification made departed from this expressed intention. As a matter of fact, immediately after making the classification, the committee admits in almost the same breath as it were, that this "classification is an arbitrary one and in the larger companies, a still further subdivision of these divisions is possible." 2 Thus what promised to be a logical grouping of services turned out to be merely an empirical one after all. It is very difficult to become reconciled to the title of the so-called "Service Department" in view of the nature of its subdivisions. The intention seems to be to make a sort of miscellaneous group and incidentally include some which are not service departments at all, but administrative such as are the bureaus designated d, e, f and g. There are certain services included in the "Service Department" which should come under the trust department because of their fiduciary character such as escrow services which are performed by the Real Estate Bureau in this organization. It is objectionable also to have two bureaus or divisions in the same institution with names so nearly alike as "The Real Estate Bureau" and "The Real Estate Division," even though one is in the Service Department and the other is in the Trust Department. The term "trust" as the title for the department is used in too broad a sense, including even secretarial functions which are not trusts within the proper definition of the term. Finally, this classification has a disadvantage from the point of view of education of the public to an appreciation of trust 1 Leaf, Erle, M., "Plan of Internal Organization Adapted to Large and Smaller Trust Companies and Trust Departments." Trust Companies, Vol. 30 (June, 1920), p. 538. 2 Ibid., p. 539. company services due to confused terminology and particularly the lack of an indicative title for the department dealing with individuals. "Court Division" is more of a repelling than appealing name for this department. It is thus a psychologically defective classification. The same objection applies to the title of the "Service Department." Summary of Objections to Organization Method of Classification of Trust Company Services. These examples are sufficient to illustrate the organization type of classification of trust company services and illustrate the inadequacy of such a method of classification for purposes of analytical treatment or for textual exposition; although this type of classification of the services of the trust company is used quite naturally in all the publicity literature of the trust companies each trust company listing the department of service available for its clientele and the convenient way to present this is in accordance with the departmental organization of the particular trust company. But there is lack of uniformity as to the names of departments performing similar types of services, and there is also lack of uniformity as to the scope of departments of service as between different kinds of organization classifications. This would naturally be so because the organization method of classification of services is by its nature an opportunistic one. The Aggregate of Departments of Services of Trust Companies. There are a number of services which are not included in the representative organization classification because there are only a relatively small number of trust companies which perform them. Furthermore, a representative plan fails to present a picture of the various special types of service which are offered by some companies. In a trust company questionnaire sent out by the author in October, 1925,1 a list of all the generally known departments of service and subdivisions were presented 1 Questionnaire sent in October, 1925, to 2,200 trust companies and 350 national banks granted fiduciary powers under the Federal Reserve Act. There were approximately 400 replies, 62 from national banks. The replies from trust companies are representative for the country as a whole. Supra, Preface, p. viii. See also Chapter XV, infra, pp. 385–90. |