Edward Filene
Edward Albert Filene was an American businessman and philanthropist. He is best known for building the Filene's department store chain and for his decisive role in pioneering credit unions across the United States.
Early life
Born in Salem, Massachusetts, Edward was one of five children of William Filene and Clara Ballin. Both his parents were German Jewish immigrants, his father from Posen, Prussia, and his mother was born in Segnitz, Bavaria. William immigrated to the US in 1848 after abandoning law school in Berlin. Reputedly Edward Bernays claimed that William was born with the surname "Katz" but upon entry changed it to a misspelling of "Feline", though more likely it was the toponymic "Filehne", the German name of Wieleń a town 90km from Posen. It was some time in the 1850s that William and Clara met while Clara was visiting relatives in Hartford, Connecticut. They married in New York City. As "a peddler, chiefly of women's apparel" William built up a company composed of several small retail shops.In 1865, at the age of 5, Edward was injured in a fall that left him with a permanent limp. Eczema plagued him throughout his life. In 1872, Clara Filene enrolled her three boys in the "Brüsselsche Handels und Erziehungsinstitut", a boarding school known for excellence in instruction and discipline in her Franconian hometown Segnitz-am-Main. The headmaster at that time, Samuel Spier, was one of the founding fathers of the early German democracy movement and an outspoken atheist; one of Edwards schoolmates was a certain Ettore Schmitz from Trieste who later became famous as the Italian writer Italo Svevo. Most of the pupils in Segnitz were the sons of German and Austrian Jewish entrepreneurs or merchants like, for instance, Edwards classmate Richard Fluss, a childhood friend of Sigmund Freud. But there were also some Christian schoolmates. The boys remained at the school until 1875, and it was a period of intense loneliness and homesickness for him as a young teenager. Filene was shy as a youth, and never married. Upon his return to the US, Edward attended high school in Lynn, Massachusetts, and worked in his father's store evenings, weekends, and summers.
Work life
In 1881, when Edward was 21 years old, his father William founded a department store in Boston. Edward began traveling in the 1880s, purchasing merchandise, studying business practices, and increasingly examining how different societies were organized and the problems they faced.Edward had passed his entrance exams for Harvard University when in 1890 his father became seriously ill. Thirty years old at that time, Edward gave up his educational ambitions to take over the family business. One of his great disappointments in his life was being unable to attend Harvard.
Together with his younger brother Abraham Lincoln Filene, he reorganized his father's department store into "William Filene's Sons Company", which would later become Filene's. Though the store did not make a profit for many years, it attracted more customers, and eventually turned a profit, even supporting the main store of Filene's during the Great Depression.
By 1928 Edward was ousted from store management by his fellow stockholders who were "troubled by his liberal management policies", but retained an office and the title of President. His ouster allowed him to dedicate more time to his passions of travel, civic organizations, and philanthropy.
He wrote numerous speeches, pamphlets and several books.
Filene's Store management policies
Edward Filene drew inspiration from the scientific management ideas of Frederick Winslow Taylor and adapted these ideas for use in the retail environment. While Taylor is best known for the use of scientific methods to increase workplace efficiency, he was also interested in how to improve the quality of work for employees. Filene is credited with refining a number of under-utilized and in some cases novel retailing techniques. For example, Filene's Department Store offered complete and honest descriptions of its merchandise and offered to give customers their "money back if not satisfied".Edward Filene was a proponent of the scientific approach to retail management. In 1909, he introduced the "bargain basement" principle. Under this plan, merchandise had to be sold within 30 days or it was marked down; after a further 12 days, the merchandise was further reduced by 25% and if still unsold after another 18 days, a further markdown of 25% was applied. If the merchandise remained unsold after two months, it was given to charity. Although Filene's Basement was not the first 'bargain basement' in the U.S., the principles of 'automatic mark-downs' generated excitement and proved very profitable. Filene personally supervised construction of the first basement in Boston. An advocate of consumer education, he introduced color matching tools in the clothing departments of his stores.
Filene was a pioneer in employee relations. He instituted a profit sharing program, a minimum wage for women, a 40-hour work week, health clinics and paid vacations. He also played an important role in encouraging the Filene Cooperative Association, "perhaps the earliest American company union". Through this channel he engaged constructively with his employees in collective bargaining and arbitration processes.
Origins of US credit unions
In 1907 Filene traveled around the world, and by February reached Calcutta, India. There, he visited some rural cooperative banks that had been promoted and funded by the British colonial government. On his return, he contacted his associate Franklin D. Roosevelt and suggested that a similar type of organization be promoted by the US government in the Philippines.He realized that credit unions could help ordinary American workers to access loans at reasonable rates. Equally important, workers could save their money so that when hard times hit, they were prepared.
Subsequent to this trip the philanthropy he practiced, combined with the steady implementation efforts of his associate Roy Bergengren were critical to the emergence of credit unions in the United States. He also donated $1 million to the Consumers Distribution Corporation to help them organize a national network of cooperative retail stores.
In 1908, Filene and Massachusetts banking commissioner Pierre Jay, helped organize public hearings on creating credit union legislation in Massachusetts. The Massachusetts Credit Union Act of 1909 was the first comprehensive credit union law in the United States, and would serve as a model for the Federal Credit Union Act of 1934.
Inspired by the experience in many European countries where credit unions were called "people's banks", Filene organized the National Association of Peoples Banks to advance the credit union cause in the US. However, little came of this until 1921, when Filene observed in Roy Bergengren the key organizer he needed. Together with Bergengren he founded the Credit Union National Extension Bureau.
In 1921, Edward A. Filene formed a savings and loan association for employees which later became the Filene Federal Credit Union of Boston, then merged with Webster First Federal Credit Union.
Filene seems to have been responsible, with the collaboration of Pierre Jay, for the adoption of the term "credit union" in the United States. His concern with fighting loan sharks and excessively costly consumer loans led to the choice of the word "credit", while his interest in working people made him want to cast unions in a more positive light.
Credit Union National Extension Bureau, 1921–1934
In 1921, Filene founded the Extension Bureau, to which he donated nearly $1 million during its 14-year history. It had four goals: to bring about the laws needed for credit union development in the various states, subsequently, to organize some credit unions in each state that could serve as examples to others, to expand the number of credit unions to the point that they could create self-sustaining state federations, and to combine the federations into a self-sustaining national association.Filene hired Roy Bergengren, and their collaboration and the work of the Extension Bureau proved very effective, bringing state laws to fruition in 26 states and substantially revised flawed legal frameworks in 5 others. In 1934 the Roosevelt Administration passed the Federal Credit Union Act, making it possible to form a credit union anywhere in the United States.
The Extension Bureau has been a model for many projects related to international development and microfinance since. Foreshadowing debates that still rage, Filene's and Bergengren's views diverged on two key issues:
First, Bergengren believed that the Extension Bureau should attempt to secure federal legislation first, rather than work state by state. Filene maintained that a national law should be based on a sound understanding of the diverse circumstances of people across America—from shrimp fishermen in Louisiana, to factory workers in Massachusetts or farmers in the mid-West. Only by developing many state laws first would such a sound national understanding be possible. He prevailed in this debate.
Second, as the Great Depression set in the Reconstruction Finance Corporation under President Hoover sought to stimulate the economy with soft loans targeted to banks, railways and large companies. Filene favoured asking for $100 million in reconstruction credits to be pumped into credit unions. Bergengren strongly opposed this position, and his view prevailed this time. "To him, it meant destroying the vital principle of the whole movement by converting a community enterprise into an agency of the government. To teach people how to help themselves was more important by far in times of depression than at any other time."