The collapse of the powerful Knickerbocker Trust Co. in 1907 triggered a financial panic similar in many ways to today’s economic quicksand. Public confidence in the financial markets plummeted, the money supply dried up, and even healthy businesses couldn’t obtain credit to prosper and grow. Some questioned whether American-style capitalism was finished.
But John Pierpont Morgan didn’t wait for direction from Washington or a bailout from taxpayers. Though semiretired from the helm of the House of Morgan banking empire, he assembled leaders of the healthiest financial institutions and, in an historic round of meetings in his private library on East Thirty-Sixth Street in Manhattan, hammered out a plan to rescue ailing trusts and stabilize the money supply. The private initiative posed considerable risk to the fortunes and reputations of Morgan and every other banker present, yet it stemmed the crisis and ultimately led to the formation of the Federal Reserve.
Different crises demand different solutions. In today’s more complex, global, and regulated economy, it’s unlikely any private individual could swing a stick the size J.P. Morgan used in ending the panic more than a century ago.
Yet what is perhaps most notable and lamentable today is how few business leaders have even tried. Some companies—Credit Suisse, Ford, J.P. Morgan (the firm, not the man) Chase, and others—have taken positive steps toward restoring public confidence. Yet the collective response from corporate and financial America has resembled nothing so much as a junior high school dance where everybody stands against the wall, fearing failure and rejection.
Business leaders who fail to lead in times of crisis leave it to others to provide the narrative by which they, and the times, are defined. So far, that storyline is less than flattering. Americans don’t by nature resent wealth and prosperity. In fact many aspire to it. They do, however, mistrust those who accept the rewards of that marketplace when times are good, yet lapse into silence and finger pointing, or extend an open palm to taxpayers without accepting responsibility when the going gets tough.
History makes it clear that recessions and depressions, far from being periods of creative stagnation, bring out the best in those willing to take calculated risks. American inventions, from the photocopier to nylon and sticky tape, poured from company research departments and basement laboratories during the Great Depression years of the 1930s.
Two of Manhattans most distinctive landmarks—the Empire State Building and Rockefeller Center—rose during the Great Depression at the command of financiers willing to thumb their noses at the prevailing pessimism of the age. And those iconic structures stand tall as signature achievements today.
Nevertheless, there is still time for leaders in the private sector to articulate their vision for recovering from this current global downturn. There is much to be done: restore confidence in the financial markets; find more accurate ways to link risks to rewards; help boards lead rather than manage by fear of executive liability; embrace shareholders’ ideas on executive pay and other initiatives; and introduce and inculcate a culture of accountability.
For those who subscribe to the oft-quoted proverb “Fortune favors the bold,” now is the time for action. Without it, the specter of a stagnant economy and rising levels of anger across the nation are all too real. The time is now for business leaders to make that choice.
Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of Stop the Presses: The Crisis & Litigation PR Desk Reference and writes for www.bulletproofblog.com. He was named to the 2009 NACD/Directorship list of “The 100 Most Influential People in the Boardroom.” Reach him at rlevick@levick.com.