If you put somebody on representing some other interest, and he is still a member of the board of directors but now his responsibility is to the stockholders as well as any other member of the board, how does he resolve these questions? How is the corporation supposed to resolve them?

Suppose the corporation is a high polluter in a particular area. It is also perfectly clear that to totally eliminate that pollution for that corporation, with no competitors doing the same thing, would sharply reduce its profits.

I don't know of any catalyst by which you can reconcile these kinds of questions, the alleged public interest against the private interest. I don't think really the boards of directors ought to be explicitly asked to take into account issues of this kind. I don't think it has ever been successfully done. That is my second point.

My concern with this suggestion is that in the long run it is. I think, diversionary. It diverts us from what are the real ways of accomplishing certain public goals which is mainly by legislation. If I were a member of the board of directors and I had a statute that tells me I either cannot pollute or if I do I will pay a tax, then I know what to do. I can assimilate that into my decisionmaking and would know what to do. If I don't have the public directive, I don't know what to do and I will guess that, by and large, even if you put public members on the board, the board is going to continue to do more or less what it has in the past, and that is to act in the interest of the corporation.

So as I say, I think the only way to deal with problems like pollution and other problems of social costs that some kinds of industries impose upon us, is to handle it by legislation. I think that is the only way it is going to be done. That is my view.

Senator NELSON. Anyone else?

Professor GALBRAITH. I am in general agreement. I supported Project GM but mostly, as Professor Turner knows, because of the temptation inherent in having the Harvard Corp. vote against General Motors.

I have basically the same feeling. If one is going to get rid of DDT or cut down on automobile emissions, one better do that by straight forward legislation and not rely on internal righteousness. There is also one other thing: We must bear in mind that the board of directors, in the evolution of the corporation, loses power. Power not only passes from the stockholders to the board of directors, but on into the management and below. As the issues get more complicated, the administration gets more complex, the whole technology of modern processes becomes more involved, the administration of plant, capital, and labor force becomes more technical, and things pass beyond the competence of aging business statesmen meeting once every 3 months.

You could have some of the most righteous citizens in the world on the General Motors board or du Pont or General Electric and if they had no more power than the present board of directors, they would not change very much.

On the other hand, I confess to feeling that these matters are part of a larger complex of issues-issues which have come into view in recent times. They require a lot more discussion than they have had in the last 20 years.

I was greatly taken by your suggestion in the New York Law Journal, Senator Javits, that the time had come for a full-dress public inquiry into these questions. I would favor much more complete discussion of this problem.

Senator JAVITS. Thank you very much. No one appreciates more than I do your support and your feeling for the idea of reform of the antitrust laws. It would seem to me it would also contribute to the social development of our country.

I note your colleague, Dr. Turner, is not quite as favorable to the idea of the antitrust revision commission.

Perhaps we could hear from the other gentlemen on both propositions. I have proposed, and I would be so happy to give each of you copies, a bill to establish an antitrust review and revision commission on the grounds that, first, the antitrust laws are archaic, especially in view of such modern developments as the multinational corporations; and, second, that with the passage of Clayton, FTC, RobinsonPatman, Miller-Tydings, and other antitrust exemptions or modifications, it is time to come to a new antitrust policy.

Professor MUELLER. On your first question, having public directors on the boards of corporations, I feel like Professor Galbraith, that this is something that we certainly should not just discard offhand.

It is going to receive a good deal of attention. It is practiced in some European countries.

Personally, I certainly would not think as a citizen that we should turn this role over to other than publicly appointed individuals. As much as I admire Ralph Nader, I am not sure that I would necessarily expect that the person he would appoint would be the one I would prefer.

I am also concerned that if it isn't someone appointed by a public body, that there is a problem that he would indeed act in the public interest. We have had experience through the years with this sort of a situation. In my recommendations, I made a modest suggestion for the appointment of a public representative. I think that this approach would be satisfactory if the individual appointed was given a rather specific task. The task that I indicated in my prepared statement was that of having someone on the board who would, in effect, help the public know what was going on in the corporation, a door through which Government agencies and congressional committees could enter unimpeded.

Robert Townsend made a very interesting speech on this a couple of weeks ago in which he pointed out how valuable such a person would be, given a small staff, to the public and congressional committees because he would know where the bodies are hidden, so to speak, and when you went to a corporation and asked for some assistance this would be someone who would be a public representative, in effect.

He would know what was going on. He could help you get your information and so on. I think this kind of a person would simply fit in with the general idea of opening up the corporation and aiding in the effort to get rid of corporate secrecy.

On your recommendations for review of the antitrust laws, I have some concern, not with the idea of reviewing them, as I think this should be a continuous process, but what I am worried about is if the

Congress were to set up a commission for 2 years to do this entire job and look at all of the antitrust laws, given the present state of our knowledge on many of these points, we really wouldn't be able to do an effective job in that period.

I was involved in the National Commission on Food Marketing, and other commissions, that had much smaller tasks than that. They would try to get all the data together, and they would end up far short of what the Congress had hoped. In the case of the Food Commission, it even had a couple million dollars.

It seems to me that the greatest step that can be taken in seeing whether the antitrust laws should be revised and just how they should be revised would be to strip the cloak of corporate secrecy from the industrial community so that people, not just a small group that such a commission would have at its disposal, could study the modern corporation over a period of years. Then, literally hundreds of people could study this from many points of view, could obtain this knowledge. This would very likely be more productive in the long run.

am just concerned that there is so much misleading information available. There are so many self-serving studies that have been prepared. At the present time the Harvard Business School has a study sponsored by the Chamber of Commerce on conglomerate mergers. They are given selective information from corporations to conduct it. They would have more information than anyone else, perhaps, when it came to testifying before your committee. In this situation I would certainly feel uncomfortable being in your position of making a decision as to whether to amend or get rid of the Sherman Act.

There are so many areas that are unknown. Until we open the corporation to some continuing scrutiny I am afraid we just can't get intelligent answers.

I do applaud the idea of some serious concern with the antitrust laws from whatever source we can find. There isn't enough discussion of this issue.

Senator JAVITS. Dr. Adams, did you want to comment? We have about 3 or 4 minutes.

Professor ADAMS. On corporate democracy, obviously I am in favor of anything which will make any organization more democratic. But it would be a delusion to think that this would provide the kind of discipline and restraint that outside forces provide on the operation of the organization. If we assume that the U.S. Senate is a democratic institution and possibly with additional reforms may be made even more democratic, I would still suggest that the major discipline on the operation of this body comes from the outside, the electorate, making its choices in a competitive, though far from perfectly competitive market.

I think that is always the more effective way of protecting the public interest than by internal democracy alone.

Senator JAVITS. Thank you very much, gentlemen. This has been very illuminating. You have come close to persuading me.

Senator NELSON. I wish we had more time because I have a whole series of additional questions, but it looks like another rollcall. I realize you haven't had lunch and neither have I, and that you do have flights

to catch. We will probably be submitting some further questions after looking at the record.

We would appreciate it if you would respond to these other questions. I had hoped to get at the question of corporate invasion of agriculture, which I think is an important matter to be regulated by statute. I have put in legislation to do that. We are going to have a special panel on that at a later date, but I would hope I could send you the transcript for your comments because the witnesses on that issue are not of the same background as you gentlemen are.

That, I think, is an interesting field. There are no economies and probably many diseconomies in corporate agriculture. The larger corporations are invading an area where they cannot outproduce the optimum-size family farmer. They are destroying, where they have gone and where they are going, an important way of life in rural America, in the small towns and the rural culture, without any equivalent offsetting benefit. I don't think it is very well understood in this country.

I will give you advance notice that I would like to send you the testimony for comment, after it is in, if you would wish to make some comment on it at that time.

Again, thank you very much for this very valuable testimony. We appreciate your taking the time to come here today.

(The following correspondence, which took place subsequently, is inserted at this point, by order of the chairman, at the request of Senator Taft:)

Hon. GAYLORD NELSON,

U.S. SENATE, Washington, D.C., Nov. 15, 1971.

Chairman, Subcommittee on Monopoly, Small Business Committee, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: I very much appreciate your granting me the opportunity to ask additional questions of Dr. Walter Adams, and to have these questions, together with his answers, appear as a part of the hearings.

I am enclosing a copy of my questions to Dr. Adams which questions you will observe go to the full sweep of his testimony rather than merely the corporate secrecy problem per se.

With kind regards,
Sincerely,

Senator ROBERT TAFT, Jr.,

ROBERT TAFT, Jr.

MICHIGAN STATE UNIVERSITY,
DEPARTMENT OF ECONOMICS,

East Lansing, Mich., Mar. 27, 1972.

Senate Small Business Committee, Senate Office Building,
Washington, D.C.

DEAR SENATOR TAFT: Enclosed herewith are replies to the questions you posed to me after the hearing on corporate secrecy before the Senate Small Business Committee on November 12.

With best wishes, I am,

Respectfully yours,

cc: Ray Watts.

WALTER ADAMS,

Distinguished University Professor.

SENATOR TAFT'S QUESTIONS FOR PROFESSOR WALTER ADAMS, WITH PROFESSOR ADAMS'S ANSWERS INTERSPERSED

QUESTION 1

1. In your testimony you describe industrial giants as "the amalgam of horizontal, vertical, and conglomerate consolidation." As to the following companies, list the number of large acquisitions which each has made since 1955, the names of the acquired companies, and the percentage of current assets acquired by such acquisitions. (For the purpose of these questions "large acquisitions" shall be defined as acquisitions of manufacturing and mining units where the acquired company has $10 million or more in total assets.)

(a) Anheuser Busch.

(b) Avco.

(c) Bethlehem Steel Corporation.

(d) Burroughs Corporation.

(e) Campbell Soup Company.

(f) Caterpillar Tractor Company.

(g) Coastal States Gas Producing Company.

(h) American Smelting and Refining Company.
(i) Deere & Company.

(j) Corning Glass Works.

(k) duPont.

(1) Eastman Kodak.

(m) General Electric.

(n) General Foods Corporation.

(0) General Motors.

(p) Gillette Company.

(q) Johns-Manville.

(r) Johnson & Johnson.

(s) Liggett & Meyers.

(t) Eli Lilly.

(u) Lockheed.

(v) IBM.

(w) Minnesota Mining and Manufacturing.
(x) Motorola.

(z) National Biscuit Company.

(aa) National Dairy Products Corporation.

(bb) National Lead Company.

(cc) PPG Industries.

(dd) Phelps Dodge.

(ee) Philip Morris.

(ff) Pullman, Incorporated.

(gg) Republic Steel.

(hh) Swift & Company.

(ii) Texas Gulf Sulphur.

(jj) Uniroyal.

(kk) U.S. Steel.

(11) Western Electric.

Answer to Question 1

As one studies American industrial history, one is indeed impressed by the fact that many industrial giants are "the amalgam of horizontal, vertical, and conglomerate consolidation." And the process did not start or end in 1955 which is the curious choice of a base year suggested in the question. The role played by mergers in the process of industrial concentration has been richly documented by successive reports of the U.S. Commissioner of Corporations in the early years of this century, the Federal Trade Commission (especially in its reports on corporate mergers in 1948 and 1969), and various Congressional committees (most recently the staff report on conglomerate corporations by the Antitrust Subcommittee of the Judiciary Committee of the House of Representatives, 1971).