Case Study #14 December 2019 Gossip, Corporate Reputation, and the 1905 Life Insurance Scandal in New York On the evening of 31 January 1905, six hundred of the richest and most powerful members of New York society descended on Sherry’s Hotel dressed in extravagant costumes designed to resemble the court of the French King, Louis XV. The wealth on display was astounding. Pearls, emeralds, turquoise, and diamonds abounded. Mrs Potter Palmer, the queen of Chicago society, appeared dressed in a diamond tiara, diamond choker, and diamond breastplates. Mrs Clarence Mackay, wife of the chairman of the Postal Telegraph Company and a suffragist, wore a gold and turquoise crown and the train of her dress was so long, that despite the help of her two pages, she was forced to sit out the dancing.1 No expense had been spared in creating the event. The two floors of ballrooms had been decorated in the style of the gardens of Versailles. Lemon and orange trees lined the corridors, while grass covered the floor.2 Madam Réjane, a French actress of considerable fame, had been brought to New York to perform in a play written specifically for the party.3 She is depicted at the ball in figure 1. Her fee, apparently, was a gift of a diamond tiara.4 Dancers from the Metropolitan Opera House performed as well and, over supper, two orchestras sat at either end of the room and played alternately so the music never paused.5 In total, the ball cost its host, James Hazen Hyde, an estimated $50,000, the equivalent of well over a million dollars now.6 Figure 1: Madam Réjane seated with others in the “Garden of Versailles” at the James Hazen Hyde Ball. Source: ‘Hyde Ball, Madame Rejane and Large Group in Garden of Versailles’ Arthur Vitols Byron Company (New York, N.Y.), January 31, 1905, Museum of the City of New York Collections. Like many young men in Gilded Age New York society, James Hazen Hyde had inherited his wealth and position. He was the son of Henry Hyde, the founder of the Equitable Life Assurance Society. James Hyde had become the vice president of the Equitable after graduating from Harvard in 1898. Soon after joining the company, his father died, leaving James Hyde as the majority stockholder in the Equitable and the beneficiary of a trust stipulating that James would gain full control of the company and its presidency Case study prepared by Dr Oenone Kubie. Case study editors: Rebecca Orr, Dr Mara Keire, and Prof Christopher McKenna, University of Oxford Creative Commons Copyright: Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) 1 on his thirtieth birthday. Hyde was set to become one of the most important men in New York’s financial world, with a ‘sacred duty’ to fulfil.7 By the time that James Hyde became vice-president of the Equitable, life insurance was already big business. But, it hadn’t always been so. Originating in early modern Europe, life insurance had appeared relatively late on the scene in America. It was only during the 1830s that life insurance began to have a bigger presence in American life. Not until the turn of the twentieth century, following a period of steady growth, and a boom and bust cycle, did life insurance emerge as the backbone of the American economy.8 Like other economies around the world, most Americans divided their savings equally between life insurance and banks, particularly given the recurrent panics that plagued banks before the development of government-backed deposit insurance. The life insurance boom was both a response and solution to the upheavals caused by urbanization and industrialization.9 As their disposable incomes rose, many American families at the turn of the century found they could save. More often than not, they turned to life insurance rather than savings accounts in banks that were vulnerable to financial panics. At the same time, the purchase of a life insurance policy was tied to respectability in America. A Figure 2: Portrait of James Hazen responsible man, Gilded Age society believed, made provisions for Hyde by Théobald Chartran (1901), his wife and children in the case of his death. Life insurance could Source: Wikipedia. save a family from destitution, but it was a long-term investment: policyholders worried about the company still being solvent when the time came to pay out the policy. With the well-being of widows and orphans at stake, life insurance companies spoke of the ‘sacred duty’ they owed to their policyholders to bolster their corporate reputation. During the nineteenth-century, the corporate reputation of life insurers went largely unchecked by government. While the newly founded state insurance departments began to enforce reporting requirement laws, they lacked the resources to regulate the insurance giants. 10 It was down to the insurers themselves to guard their reputation and to avoid the mistakes of their British counterparts, who had been embroiled in gambling scandals. 11 Men in the American life insurance business were to be responsible and upstanding citizens, no mean feat in the scandal-rife world of Gilded Age New York. At the centre of New York’s gossip mill, always on the hunt for a new scandal, was William D’Alton Mann and his weekly magazine, Town Topics. Every Thursday, Town Topics’ readers could revel in gossip ranging from divorces and affairs to rumours about the stock market and Mann’s latest bugbears in the form of local politics or the apparent need to annex Cuba.12 Thus Town Topics was equal parts social and financial gossip in turn of the century New York. Mann’s business was social reputation and he did well from it. Mann’s approach was also innovative if somewhat shady. Most notoriously, Mann devised the ‘catch and kill’ whereby Town Topics agents would hunt down gossip and scandal and then approach those whose reputation stood at stake.13 In exchange for a loan (which Mann had no intention of paying back), buying advertising in the magazine, or subscribing to an extortionately expensive volume published by Mann, the scandalous story would disappear. For the lucky few who paid enough, Town Topics could be a powerful ally, printing only positive reports and buttressing an individual’s social capital in the financial marketplace. Those who did not pay, however, found themselves on the receiving end of Mann’s sting. Town Topics avoided libel suits with another Mann innovation: the blind item, although hints as to the anonymous participants in a scandal were hardly subtle.14 Fortunately for the Hydes and their reputation for dependable life insurance, Town Topics was firmly in their corner. Henry Hyde had made a loan of $165,000 (through the Equitable) on real estate owned by William D’Alton Mann and his publishing company. In return, both Hyde senior and his son James were posted on the wall of the Town Topics office as immune from reports of scandal.15 By the time of the ball, therefore, James Hazen Hyde was well known in New York society, but had few, if any, scandals attached to his name. Creative Commons Copyright: Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) 2 The ball itself seemed unlikely to change Hyde’s reputation. While the ball was among the most noteworthy of the season, and Town Topics reported on men and women discussing the night and their costumes for weeks before and after, James Hyde’s ball was hardly out of the norm of society balls.16 Marie Antoinette and the French court were the height of fashion; Figure 3: Town Topics: The Journal of Society’, (December 7, 1905), 1. just three weeks before Mrs Source: Town Topics. Astor (the wife of the real estate mogul who would die with the sinking of the Titanic) had appeared in a Marie Antoinette costume at her own ball with a choker of pearls while coal baron, Henry Clay Frick (whose home, now the Frick Museum, was one of the grandest in New York), reportedly owned, and used, Louis XIV’s throne.17 Sherry’s was a popular spot for balls and large expenses were to be expected.18 More was more in Gilded Age society. Ballrooms were transformed into jungles, or fairylands, or even treasure islands. The hosts imported exotic animals. Costumes ranged wildly from satin lined tiger skins to hairpieces illuminated with little electric lights – an incredible, if somewhat dangerous, extravagance at the turn of the century.19 At one notable debutante ball, the hosts had imported ten thousand butterflies that they hung from the ceiling in muslin pouches, but by the time they were released the insects had suffocated and, instead of the fluttering of thousands of beautiful wings, the guests were showered with dead insects.20 Without any such mishaps, initial coverage of the Hyde ball was positive. Reporters had been allowed in to special viewing balconies to witness the night and by the following morning reports of the splendid event appeared throughout the New York newspapers. Town Topics reported that the ball “rivalled in splendour all the celebrated fancy dress affairs that have been given in the history of New York society.”21 Hyde, himself, appeared as a stylish, creative host.22 Just two weeks later, however, the tide turned. What had seemed impressive now appeared excessive. Most surprisingly of all, the catalyst for the sudden change came from within the Equitable company itself. Equitable and “The Mud of Iniquity”23 In 1905, James Hazen Hyde was first vice president of the Equitable and set to assume the presidency the following year on his thirtieth birthday.