are "bogged down" by the inertia caused by the shortsightedness of others.

I have to run and vote. I will be right back. I will ask Senator Gravel to finish the hearing.

Senator GRAVEL. Thank you.

Mr. Hamrin, I think I left about page 4. Since I think your testimony is important, I will ask you to be redundant and just walk me back through the balance of your testimony.

Mr. HAMRIN. You left actually just before I was making my enthusiastic pitch for your proposal.

Senator GRAVEL. Well, that is what I wanted to hear. I have a good idea you are obviously very bright, and we need everything we can get on the record.

Mr. HAMRIN. The major point I was trying to make is that we need more vision in this country, and we need people who are willing to go beyond marginal changes, and in working with you and some of your ideas, I recognized that you were willing to take such initiative in trying to think of ways in which we could fundamentally alter the income and wealth distribution. I also emphasized that the GSOP proposal was something that was on the table at this point, that was being actively considered, and that we should go forward with it. In this way, we could see what the results are, see what the reactions of the people are when they actually begin receiving fairly substantial dividend checks. I also made the point that this probably would lead to further requests, not only by people in Alaska, but elsewhere, for being part owners of major projects through GSOP mechanisms.

So I would again encourage this committee to do whatever is possible to see that this GSOP proposal does go through, and encourage you to continue your efforts in Alaska to demonstrate the merits of it.'

It is at the experimental level, which is something that we talked about at the JEC-we have to start somewhere, and this is a pretty good place to start. So I was primarily encouraging the committee to go forward with it.

Senator GRAVEL. I want to thank you for that, and I might say that you are quite right. The ESOP experience we have had thus far really has not put anything concrete into the hands of individuals. When they retire, they are going to get their stockownership. There is no dividend passthrough at this point in time.

The GSOP, particularly as a result of the opportunity with the Alaska Pipeline, will be able to give individuals a check a year from now for $500. I have suggested that we include in markup as part of passing this legislation the proviso that the GSOP Corporation would tie into a computer, and that all the people in Alaska would report quarterly whenever they received their dividend check. There would be inquiries made as to what has happened to their spending patterns, what has happened to their attitudes toward work, what has happened to their attitude toward corporate enterprise and profits, and what has happened to inflation.

Since we are such an insular economy up there, you could not get a better situation to study all of the possible ramifications with 450,000 people and then build upon the compendium of knowledge we acquire as to what we would do in other parts of the country.

So I appreciate your endorsement.

Mr. HAMRIN. One thing I should raise is that in something that you have written on this I am not sure exactly what it was you projected that if a few of the energy projects proposed for Alaska were to be financed by this method, that by the year 2000 the average family of four would receive $40,000 in dividends.

Well, if that is the case, I think you had better think about the massive influx of population that will be coming your way in Alaska. Senator GRAVEL. I think we could handle that, obviously by definition. It is a major criticism that comes forth, and I would suggest that the stock would be issued after a year's residence. That would take care of the problem.

You could have class A stock for people who have been there, continually, and if you want to issue other stock later on, you could have a class B stock, so you get a progressive reward in that regard.

I might say there are some computations that we have done earlier that I have found most revealing. With a $10 billion capital investment, the dividends would be about $10,000 per person, or $40,000 per family of four by the year 2000. This assumes that the loan is paid off and that the population of Alaska is 785,000 by that time.

That squares with the gift that we now give about 500,000 American families today of $12,000 a year. That is what we gave them last year on the investment tax credit.

That is 500,000 families out of 50 million families. We find it in our hearts to have great largesse for some today, which is the reason why our ownership is skewed the way it is.

I also want to thank you, though, for some new income figures that you had put forth in your testimony. When this staff study was done by the Joint Committee, was the table that was used your work? Mr. HAMRIN. Yes.

Senator GRAVEL. I want to commend you on that. Because, as you pointed out, nothing had been done since the early 1960's. We have all been deluded, and Treasury was the best example of this. The chamber of commerce spot that talks about how everybody owns Exxon is just a lot of malarkey. Not everybody owns Exxon, and the proof of the pudding is right here. There may have been an increase in positive terms, but in relative terms, there has been no change since the turn of the century.

And your first table here that you developed and have submitted today is the only real source. There is another professor who I came across who has done some work in this area. His very fine work totally confirms your conclusions about the narrowness of the ownership base in this country. We really have been deluding ourselves. We do not have free enterprise. We do not have capitalism. We have it just for the few, and the rest of the people have to live off of these transfer payments that exist.

That is the reason why we are in great difficulty today.

Mr. HAMRIN. I am not sure whether you were here or not when I encouraged this committee, which I believe would have the jurisdiction, to request, or perhaps demand, annual or perhaps biannual reports from the Treasury on the distribution of wealth in this country.

Senator GRAVEL. I would hope the staff would make note of that recommendation. I think that is a very good one.

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Mr. HAMRIN. This is a JEC recommendation in its 1976 annual report, which came right after recommending broadening capital ownership, and I hope that this committee could follow up on that.

Senator GRAVEL. You just reminded me that I made that request to the Banking Committee for the Humphrey-Hawkins bill. If they do not do it, let us put in this legislation a requirement that Treasury compile periodical reports on the distribution of wealth. At least they will be a little more glib with the figures the next time they come before us. Mr. HAMRIN. We have statistics on almost everything-the greatest minutiae of the Consumer Price Index or unemployment-but somehow the distribution of wealth is just a neglected area. It is too touchy, I guess, for us to really get into.

Senator GRAVEL. As an economist, I was also impressed with your reasoning why this never really dawned on the great economists: The Friedmans, the Galbraiths. I once had a meeting with Dr. Galbraith and brought this point up, and he said it was just a tremendous problem, and that was the end of it. No sense or feel of what to do about it. It is such a big problem that we do not think about it, and I think it is the most fundamental problem that we face in our economic system. Mr. HAMRIN. It is called vision, and being able to get out from your own tunnel vision to see that the old hackneyed solutions that you put forth, which are still being put forth today to combat stagflation in general, just are not going to cut the mustard any more. The monetary and fiscal policy levers that seemed to work so well in the 1960's were really due to just the confluence of fortuitous economic trends over the past two decades which made those policies look good. But now that we are no longer having long-term trends which are so beneficial to the society, we are really beginning to see that there is no magic within just manipulation of fiscal and monetary levers. Now we have to begin to look at some of the structural problems, one of which is this high concentration of wealth.

So it is all part of a package here, and I hope that eventually my professional colleagues in economics and people in the bureaucracy can begin to see that we have to look for some new solutions, and your GSOP proposal is certainly one.

Senator GRAVEL. I want to wish you well on the book you are writing because that will help develop our literature in this area, and I thank you very much for your testimony.

Mr. HAMRIN. Thank you.

Senator GRAVEL. Our next witness is William Denton, vice president for industrial relations, Southern Pacific Co.

Mr. Denton?

STATEMENT OF WILLIAM DENTON, VICE PRESIDENT FOR INDUSTRIAL RELATIONS, SOUTHERN PACIFIC CO.

Mr. DENTON. Good morning, Senator. I will give you a brief overview of Southern Pacific Co.'s employee stockownership plan and briefly comment on a couple of aspects of S. 3241 that are of concern

to us.

I was not here yesterday, but I think that from the remarks this morning that our plan would very much approximate those of the other companies that have testified, and I believe we are very con

sistent with the philosophy that has been expressed by members of the committee this morning.

Mr. Strauss made the point that everyone should have a piece of the action, and I think our plan maximizes that aspect of the employee stockownership in that every employee of our company is eligible for the plan, and each employee will receive the same share as every other employee.

We have the broadest participation possible. Our requirements for eligibility are 25 years of age and 3 years of employment, and the 3-year provision is essentially to make sure there is some stability and interest on the part of the employee in the company.

We do provide that employees with IRA's-individual retirement accounts are not eligible, because if they participate in an ESOP, then they are not eligible for an individual retirement account.

There is a provision in S. 3241 that would make these employees eligible in section 3(a) (2) (c) wherein it states that being in an IRA does not disqualify you from the ESOP. We feel that the provision in S. 3241 would very definitely help many of our employees who now have IRA's by making them able to participate in our ESOP. We also believe it desirable that on final distribution, the employee be able to receive cash, at his option, in lieu of stock, and our plan so provides.

We have found that there are certain administrative problems involved in such a broad-scale employee stockownership plan which will have approximately 40,000 employees participating, and in order to have 40.000 employees participate, we have to review about 55,000 employee files. So this is also adding a tremendous number of stockholders, and therefore, the computer and administrative programs are much larger than we anticipated, and just the cost of administering this program is going to be rather expensive.

We anticipate that the fees will be about $50,000, and for each mailing it will be about $28,000.

Our plan is in its infancy in that it will be submitted to the Internal Revenue Service for approval next week. Our base year will be 1977, and we anticipate that approximately $2 million will be available for distribution, so the share for each employee will be approximately $50. We also like the credit option that is in S. 3241, wherein it provides that either you can take advantage of your investment tax credit or a percentage of the aggregate compensation of the participants. With our policy of broad participation, that option would definitely increase the amount of the shares.

There is absolutely no earnings test for participation in our plan. One aspect of S. 3241 that might be troublesome is that it provides for an involvement of collective bargaining representatives in the participation of the employees, and it is certainly my view that the whole concept of employee stockownership would best be kept out of the collective bargaining scene completely.

I have found that our employees are very sophisticated in handling their financial affairs and if they do not want to participate, they do

not have to.

But we are just in the process of finding out what the degree of interest is now in distributing the enrollment cards. So I do not see

any real purpose in involving collective bargaining representatives for those employees who are represented by labor unions.

In short, Senator, I believe that our employee stockownership plan very definitely complies with the spirit and intent of the committee's bills, and we are very proud to have this, and we are looking forward to good results from it. Our first distribution, we expect to be after the first part of 1979.

Senator GRAVEL. Do you mean distribution directly—

Mr. DENTON. To the trustee.

Senator GRAVEL. I thank you very much. I appreciate your coming forward and having your views.

Mr. DENTON. Thank you.

[The prepared statement of Mr. Denton follows:]

STATEMENT OF WILLIAM R. DENTON

I am William R. Denton, vice president of Southern Pacific Co., One Market Plaza, San Francisco, Calif. My responsibilities for Southern Pacific include labor relations, personnel, and all other employee-related matters. I am a member of the Southern Pacific ESOP Committee.

Today I would like to tell you a little about our ESOP, our philosophy behind it, some of the complications arising from it, and how we see it working, and I will make some references to the provisions of S. 3241.

Our ESOP has not yet been approved by the IRS. Our plan was approved by our Board of Directors last September, and by the end of this month we will have the complete plan and trust agreement ready to file with the IRS. Our base year for eligibility and our tax year is, therefore, 1977. Our first distribution year will be 1978. We are hopeful of obtaining IRS approval of our plan as a qualified plan by the end of the year.

Our basic policy for our ESOP is that all employees in the company should share equally. Our plan is not limited to management or any other defined group. The amount of each share will be equal to that of every other share. There is no earnings test or criteria. This means that employees throughout our transpor. tation system, from Oregon and Nevada through California and the Southwestern States to Louisiana and Arkansas, will be participating. The plan also includes employees of our Communications Company and all other subsidiaries. To be eligible to participate in our ESOP, an employee must be 25 years of age and have received compensation in each of three consecutive years. This require ment is to simplify administration and to reward those who have indicated some employment stability and commitment to the Company. Temporary, shortterm employees are not eligible.

Employees who have an Individual Retirement Account (IRA) are not eligible under our plan. Many of our employees are able to have and do have IRA's. Under present law, if they then participate in an ESOP, they lose their eligibility for an IRA. As things now stand, their IRA's are more valuable to them than our ESOP will be, so in order not to adversely affect their personal savings programs, we make those employees who have IRA's ineligible to participate in our ESOP.

Section 3 (a) (2) (c) of S. 3241 would change the law so that at least in the case of SP employees, participation in our ESOP would not interfere with their continuing to save under an IRA. This section would thus benefit many of our employees.

For our first distribution SP expects to allocate approximately 2 million dollars. We will have over 40,000 employees eligible, so each participant will receive about $50 worth of our stock. We recognize that this is not a large amount per person, but in principle it is clearly a major step in keeping with the ESOP concept of broad employee stock ownership.

The complexities and complications we are experiencing stem from our broad participation approach. We have had to take into account the fact that some of our employees have IRA's as I have mentioned. This would not be a factor if we had limited our participation to management.

Broad participation increases the out-of-pocket cost to the Company. Expenses associated with keeping records, mailing reports to participants, and adminis