Power to decide what kind of jobs will be created and what kind will be terminated.

Power to determine whether new jobs that are made and old jobs that are wiped out will be located in New York, San Francisco, Hong Kong or Frankfurt.

Power strongly to influence, if not finally settle, whether Americans will travel about their cities in vehicles that are polluting, expensive, and dangerous or clean, cheap and safe.

Power to overload every sanitary landfill in the country by substituting throwaway bottles for returnable pop and beer bottles.

Power to determine-and here we come down to the very particular interest and jurisdiction of this committee and subcommitteewhether small, independent entrepreneurs will or will not have opportunities left open to them to enter and strive and compete in particular lines of commerce.

It is now many years since small business was forced out of most types of manufacturing, including almost all those of major economic importance. Today, retailing and farming are being made, by giant corporations, increasingly precarious occupations for entrepreneurs who are not also millionaires.

The present hearings were begun 2 years ago to pursue further important questions that had been raised in 1967 and 1968 hearings conducted jointly by this subcommittee and one chaired by then Senator Morse. The principal subject was and is corporate giantism. All the hearings have been concerned with that. The present phase of the hearings is going to explore the importance of corporate secrecy in the building and maintaining of corporate power.

Corporate giantism is a shorthand way of describing an economic and social development that is still quite new in American and world history.

The corporation is a human invention to serve human, social needs. In theory, it is subservient both to the State that creates it and the market in which it competes. If the corporation does not fulfill its social obligations, under the theory, the State can amend or even revoke its charter. If it lapses in economic efficiency, its market competitors will force it to improve-or force it out.

For most of the approximately 2 million American corporations, this theory is also close to fact. But for a very few corporations-less than 1 percent of the total-the theory no longer seems to fit the facts. These few corporations have become much larger in economic size and power than either the States that chartered them or the markets in which they buy and sell..

Compare, for example, Standard Oil Co. (New Jersey) with the State that granted its charter and whose name the company bears (in parentheses). Jersey Standard had 1967 sales of almost $13.3 billion. The combined general revenues of the State and all local governments of the State of New Jersey that year were under $3 billion.

Compare, for another example, the Pittsburgh Plate Glass Co. with the industry whose name it bears-or used to. (It changed its name to PPG Industries, Inc., in 1968.) PPG is, of course, one of the world's

leading producers of flat glass, an industry designation that includes plate glass, sheet glass, laminated glass, and other products. In the Standard Industrial Classification, the flat glass industry bears the code No. 3211, and in 1967 just four companies accounted for 94 percent of all shipments of that industry.

But the total value of shipments of the entire U.S. flat glass manufacturing industry in 1967, was only $611.3 million, while the total company sales of PPG that year were $943 million. It seems only fitting that Pittsburgh Plate Glass, No. 93 in Fortune's ranking of corporations by 1967 sales, the next year changed its name! Actually, it had outgrown the old name at least three decades earlier. Many other U.S. industrial giants have recently slipped out of their old one-industry titles into others that don't tie them down, even nominally.

Not only States and industries but even nations are now dwarfed by the giant corporations. We have just received from the Library of Congress a new tabulation of the 100 largest "money powers" of the world for each of the years 1960, 1965, and 1970. This is a listing of the gross national products of countries and the total (net) sales of companies, interspersed and ranked by size.

Economists tell us that it is reasonable and valid to equate a nation's GNP with a company's net sales for purposes of comparing their relative economic size. I shall insert the tabulation in the record of these hearings, as a primary exhibit. (See app. I.)

It is interesting-and not especially comforting-to note that in 1960, there were 59 countries and 41 corporations on the list. In 1965, there were 57 countries and 43 corporations. In 1970, there were 49 countries and 51 corporations. Plainly, the corporations are growing faster than the nations.

The total budget receipts of the U.S. Government-all tax and other revenue sources-were $210 billion in fiscal 1970, ending in mid-1969. The total 1969 sales of the Fortune 500 were $444.7 billion, or more than twice as much.

The 200 largest American corporations in the last 20 years have increased their share of all manufacturing-company assets from under 50 percent to over 60 percent. That means that the share remaining for everyone else in the manufacturing sector has gone down from over 50 percent to something under 40 percent.

Clearly, the economic, social and political importance not only of small business but of any business concerns other than the multibillion-dollar, multinational, multiindustry giants is on the wane, relatively speaking.

There are numerous additional examples, but for now, in a general way, that may serve to indicate what we mean by "corporate giantism."

Corporate secrecy is a shorthand reference to another large and complex set of facts and practices. One of many ways to consider corporate secrecy is in monopoly terms.

Francis Bacon insisted that "knowledge is power." Corporate secrecy may be viewed as monopolization of knowledge, and thereby of power. In a working paper we have prepared, seven different as

pects of corporate secrecy are listed.1 Rather than read the list, I will give a few examples.

One company-it is imaginary but not at all unrealistic-has total sales of over $3 billion a year, derived from operations in petroleum production and refining, mining, manufacturing (in 18 different threedigit industries of the Standard Industrial Classification and 80 different four-digit industries) field crops, canning, transportation, wholesaling, and retailing. It operates in 43 States and 25 foreign countries. It buys from, sells to, and competes with 20,000 small businesses around the country and the world. In its annual report to stockholders and in the form 10-K it files annually with the Securities and Exchange Commission, it reports its sales and profits in just five broad, completely arbitrary "lines of business" selected by itself. This hypothetical firm resembles closely at least three or four actual giant corporations doing business today.

The competitors of such a corporation may suspect that it is making immense profits in some operations and using them to subsidize losses, with predatory intent, in other lines; but there is no way to find out.

In our working paper, we quote Prof. David Solomons of the Wharton School, who gave an actual example to match this imaginary one. Speaking at a Tulane University symposium on public reporting by conglomerates, the professor said:

A grave inequity is perpetrated by not requiring the reporting of segmental results, for companies making a narrow line of products may feel at a disadvantage compared with more diversified companies. A good example is Maytag, specializing in home laundry equipment. Its principal competitors are no more than subdivisions of the major appliance divisions of companies like General Electric, Westinghouse, and the Frigidaire Division of General Motors. Maytag's results are of considerable interest to the home laundry subdivisions of these companies, whereas, Maytag can learn little from its competitor's accounts.

This illustrates one type of injury and injustice that corporate secrecy brings about in the competition between big business and smaller business. The hurt is by no means confined to very small concerns, incidentally. Maytag is itself one of the Fortune 500. American Motors is, too, and it has the same kind of problem.

Another type of corporate secrecy involves product information. A corporation's own tests often reveal quite specific information about a product's performance characteristics and life expectancy. Only the positive facts, as a rule, are shared with the public. The negative facts are preserved in corporate secrecy, sometimes with a hazard to life and limb.

Another type of corporate secrecy-one we neglected to mention in the working paper-involves the political activities and influence of corporations. These hearings will be open to documented testimony on that subject, too.

To give focus to these hearings, we have prepared and published a list of "Sixteen major questions to be considered by the subcommittee." I will insert them into the record at this point.

(The list referred to follows:)

1 Working Paper "A" by Gaylord Nelson and Raymond D. Watts. "The Nature and Dimensions of Corporate Secrecy: The Subcommittee's Major Questions 1 through 3: Discussion, Theories, and Some Further Questions:" see app. II. Comments of LingTemco-Vought, Inc., will be found in app. III, of the Federal Trade Commission in app. VI, and of the Securities and Exchange Commission in app. VII.

Hearings on Corporate Secrecy
Before the

Subcommittee on Monopoly

of the

Select Committee on Small Business, United States Senate

Sixteen Major Questions to be Considered by the Subcommittee

A. Nature and dimensions of corporate secrecy.

Question 1. What is meant by the term "corporate secrecy”?

Question 2. What are the principal aspects and types of corporate secrecy? Question 3. What are the economic and social purposes, benefits, costs and implications of corporate secrecy, from the viewpoints of giant corporations, small businesses, consumers, farmers, inventors, investors, economists, scholars, labor, regulatory agencies concerned with such matters as fair pricing and the protection of the environment, and other groups in the society? B. Regular and routine corporate information disclosure today.

Question 4. What kinds and quantities of information are the giant corporations furnishing to the public, to government, or to both today

(a) through their published annual reports and voluntary disclosures to private directories and various business and investor publications? (b) through required filings with various agencies of Federal, State and local government?

Question 5. How accessible or inaccessible to the public is the information previously filed and currently being filed by giant corporations with the various agencies of government?

Question 6. What problems of comparability and comprehensibility exist in using corporate information filed with government?

C. Irregular and occasional corporate information disclosure. Question 7. What kinds of information about giant corporations have come into the public domain through other than routine sources, such as(a) public records of litigation in Federal and State courts?

(b) Congressional hearings records?

(c) revelations of corporate insiders and former insiders?

Question 8. How can the small businessman and small farmer (and their lawyers), the small investor (and his market analyst or mutual fund), the working man (and his trade union), the consumer (and his public advocates), and all the other interested persons find—and use—the information that is technically "available"-but deeply buried-in these obscure, immense and labyrinthine sources?

Question 9. How can the groups mentioned in Question 8 themselves employ these special and occasional agencies-the courts, the Congress, corporate "whistle blowers"-to cause corporate giants to disclose further information? D. Routine corporate NON-disclosure today: proper and improper areas of

secrecy.

Question 10. What kinds of information from and about giant corporations should be but are not today routinely available to the public, in a systematic, accessible form?

Question 11. What kinds of information are giant corporations today furnishing to government agencies (and to what government agencies) "in confidence" that is, with a promise from the government that the public will have no access to it?

Question 12. What are the proper purposes, scope and limitations of confidential treatment for corporate disclosures to government agencies?

Question 13. What are the legitimate, defensible purposes and areas of corporate secrecy? How much and what kinds of corporate information quite properly should be withheld

(a) from the public at large but not from government?

(b) from everyone outside the company, including government?

E. Areas for administrative improvement.

Question 14. Which government agencies, under existing statutory authority, could do a better job of collecting and publishing information from and about giant corporations? How?

F. Areas for legislative improvement.

Question 15. What existing legislation impairs or impedes disclosure of information about giant corporations that should be in the public domain but is not?

Question 16. What existing legislation should be amended or repealed, and what new legislation should be considered and enacted, to cause information about giant corporations to come into the public domain in more adequate quantity and quality and in more accessible forms and places?

Senator NELSON. Before the hearings are ended, we hope to hear views on all these questions, and more, from representatives of small business and large, from investors, mutual funds, investment advisers. labor leaders, consumer advocates, antitrust lawyers, economists of various schools, agricultural experts, and government officials. We extend an open invitation at this time to everyone interested to submit answers, in writing, to any or all of our questions, for consideration by the subcommittee and inclusion in either the published or unpublished appendixes to the record.

Our witness today is Mr. Ralph Nader, who I am sure needs no introduction.

(Biographcial notes on Mr. Nader and his associate, Dr. Irene Till follow :)

BIOGRAPHICAL NOTES

Ralph Nader, Suite 101, 1832 M Street N.W., Washington, D.C. 20036, was born in 1934. He was graduated from Princeton University and Harvard Law School, where he was editor of the Harvard Law Record. He is a member of the Connecticut and Massachusetts Bars and has been admitted to practice before the U.S. Supreme Court. His interest in auto safety led to the publication in 1965 of "Unsafe at Any Speed." He was selected as one of America's ten outstanding young men by the U.S. Junior Chamber of Commerce in 1967. He now serves as director of the Center for Study of Responsive Law and heads the Public Interest Research Group and the Corporate Accountability Research Group in Washington, D.C. His last previous appearances before the Subcommittee on Monopoly of the Senate Small Business Committee were on July 10 and 23, 1968. His testimony on those dates is published in the printed record of hearings entitled "Planning, Regulation, and Competition: Automobile Industry-1968," 90th Congress, Second Session.

Irene Till, Suite 101, 1832 M Street, N.W., Washington, D.C. 20036, is currently an economist with the Corporate Accountability Research Group. She has served formerly as an economist with the Department of Health, Education and Welfare; the Subcommittee on Antitrust and Monopoly, Senate Committee on the Judiciary; the Federal Trade Commission; and the Antitrust Division, Department of Justice.

STATEMENT OF RALPH NADER, WASHINGTON, D.C.;
ACCOMPANIED BY DR. IRENE TILL

Senator NELSON. Mr. Nader, you may present your statement however you desire. If you wish to extemporize on any aspect of it, feel free to do so.

Mr. NADER. Thank you, Mr. Chairman.

With me today is Dr. Irene Till, who will have some specific comments to make on other areas of corporate secrecy which are not discussed in my testimony.