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This kind of disclosure on military business would greatly assist public interest research efforts, the public's right to know how its tax dollar is being spent, and Congress own need to make informed decisions on military expenditures.

Having suggested areas of disclosure, let me come back to the wider issue.

Information is only the starting point for effective control over corporate activity. These hearings are concerned with the wider responsibility of the Federal Government for insuring that corporations behave in socially responsible ways. Our work at CEP has convinced us that information, legislation and enforcement are all equally necessary for effective control.

Several of our studies, such as the study of western coal lands leased by the Department of Interior, revealed minimal price leases to coal developers which did not result in an increase energy supplies. Our study of the employment of minorities and women in banking, "shortchanged,” revealed inadequate performance by the Treasury in pressuring banks toward more socially responsible practices. Our study of oil pollution, "cracking down," showed that

the most effective pollution control, such as of air pollution by oil firms in Los Angeles, depended on solid governmental regulations and enforcement by local authorities. One has a right to be skeptical that the problem of corporate social responsibility can be solved simply by increasing the Federal Government's responsibilities.

Some of the debate with which this committee is concerned turns on the issue of regulation versus deregulation. Government regulation by independent agency is no guarantee of socially responsible corporate behavior. Harvard economist Richard Caves concluded 20 years ago that the effect of CAB regulation was to create an oligopolistic market and unnecessarily high air fares in the airline industry. More recent work by the Senate Subcommittee on Administrative Practice and Procedure indicates that little has since changed in this industry. Other regulatory agencies are equally noted for becoming the captives of the industries they are supposed to be regulating.

Regulatory experience of this kind has led to calls for deregulation and greater competition. Yet unregulated industries are also concentrated, and they are no more socially responsible.

We have found, in some studies, for example, that environmental and employment actions of competitive firms are often worse than even those of concentrated and regulated firms.

The key element in any effective Federal policy, and one in which Congress can play a major role, is greater disclosure. We have found that the results of voluntary disclosure to CEP have led to positive corporate response.

I am not suggesting that it has been perfect. We have gotten some results on updates of our studies. If we had a minimal effect on the basis of voluntary information, imagine the effect that wider and more systematic data on corporate behavior would have.

I am not here today to ask either Congress or the Executive to take over the kind of work we have been doing, however. CEP has a strong commitment to continue its research work, in the expectation that it will help Congress and the Executive act more effectively.

Additionally, the Executive has the responsibility to gather and report data, and the Congress to pass and enforce laws. Such actions help private groups like us act more effectively to implement greater direct public control over corporate behavior, and in turn, to provide the government with useful data. Responsible corporate behavior depends not only on the Government but on the actions of all citizens, as consumers, stockholders and investors, employees and voters.

We are happy to have provided Congress with data it might not otherwise have had. Our study of contractor hiring of retired military officers, "military maneuvers," significantly contributed to new, proposed legislation redefining the concept of conflict of interest, and to recent hearings on the topic before the Joint Committee on Defense Production.

Our earlier coal land study focused attention on the leasing problem and encouraged amendments to a revised Coal Leasing Act, now pending before Congress.

Later this summer, the council will testify before the Senate Banking Committee on the update of our study of the employment of minorities and women in banking. Our limited resources have .occasionally forced us to turn down other such requests.

Congressional and executive action on disclosure would help make our work easier, less expensive and more useful. We welcome the chance to present our views at hearings such as these, in the hopes of creating a more socially responsible corporate world. Thank you.

Senator DURKIN. Thank you.

Speaking about disclosure, what is and who funds the Council on Economic Priorities?

Dr. Adams. We have basically three types of funding. One is foundation grants and large individual donors. These funds are earmarked either for general,

administrative purposes of the council or for particular research projects. That covers about 60 percent of the council's funding.

The second two categories cover the remaining 40 percent. One is corporate and institutional subscribers. We have about 150 corporate subscribers of the council who pay an annual fee for council's publications and briefings.

The other category covers individual memberships. We have somewhere around 600 individual members who receive council publications.

Senator DURKIN. Would you be willing to provide that information for the committee?

Dr. Adams. Yes, that is in our annual report. I will be happy to make that available.

Senator DURKIN. Fine. I gather your most recent thrust has been more disclosure in military sales and defense spending.

Dr. Adams. That's one of the major thrusts of my testimony this morning, yes.

Senator DURKIN. There are people that say that the cost of disclosure becomes prohibitive, that in a manufacturing operation you have more people devoted to disclosure than you do manufacturing.

Where do you draw the line? I can remember L.B.J. showing his scar. That was probably ultimate disclosure, but disclosure-but where do we draw the line, what is reasonable disclosure and when are we harassing business?

Dr. Adams. That is a very difficult line to draw, Senator. One of the ways you draw it is by conducting a much more systematic review of the kinds of information that companies already maintain, which is easily assemblable and reportable.

Senator DURKIN. Who is going to do this now!

Added on another Governnment payroll, you know, we will have the space from the ICC when they move out? Set up another agency?

Dr. ADAMS. I don't know which governmental agency would be involved in that. Perhaps the Government should get involved and certainly public interest groups such as ourselves and others would be interested in that effort.

Senator DURKIN. Do you think the corporate entity in charge of black bags in going to make a disclosure ?

Dr. Adams. Only under pressure of law.

Senator DURKIN. There have been laws against that for quite a long time.

Dr. ADAMs. Have they been enforced?

Senator DURKIN. But we will have at least the recent widespread abuse.

Dr. Adams. Not only is this a recent problem, but I have been looking at the old "Merchants of War" hearings that Senator Nye held in 1934, which talked extensively of the activity of firms like Lockheed and Boeing, in bribing overseas officials. That's nothing new.

Senator DURKIN. How does a corporation compete in a world that, in an overseas world that is not as concerned about what we may call some of the niceties of a business transaction?

Dr. ADAMS. Given what we have learned in the last year about domestic American political contributions, I'm not sure that the question of niceties is strictly a foreign problem, Senator.

Senator DURKIN. I'm not talking about domestic political contributions. I only raise that because I wonder, if that type of activity was also against the law, disclosure has not solved the problem. And I-I raise the question first—will disclosure by itself work unless there is a very strong enforcement procedure? Who is going to do the enforcing?

Dr. Adams. The basic methodology of many of the council's studies involves comparing corporations along various lines of socially responsible action on the basis of voluntary disclosure. For example, in the steel industry, our pollution study received absolutely no voluntary cooperation from the firms. Therefore, we had to rely on other sources of information on their air pollution. You can appreciate that makes doing an effective comparison difficult.

What I'm saying this morning, is that information is required in a comparable and regular and accessible form. Most of the standards that I have suggested today do not involve a large increase in costs for the corporations providing the information. Making that information available certainly is not enough to guarantee socially responsible corporate behavior. It's just the first step, providing information that Congress can use to intelligently legislate and the Executive can use for enforcement.

You have to combine all three, as I said in my statement. You have to have the information, combined with laws and enforcement.

Senator DURKIN. Could it not be that stronger and more complete disclosure be accomplished through existing statutes ?

Dr. ADAMS. If you look at the disclosure requirements of the different Federal regulatory agencies and the extent to which they are enforced, the variety ranges from soup to nuts.

Some have fairly complete disclosure of stockholding information, such as the CAB; some, such as the FMC, allow the disclosure of nothing and say the information is not available to researchers such as ourselves.

Senator DURKIN. Might not the solution be to require more vigorous performance maybe by some of the existing structure, rather than creating a new one?

Dr. Adams. To implement the model corporate disclosure regulation, I don't think that you would have to create any new agency. It would merely expand the reporting requirements of existing regulatory agencies.

Senator DURKIN. So to get more disclosure, you don't need a federally chartered corporation.

Dr. ADAMS. Not necessarily, no.

Senator DURKIN. How far should the Government go in trying to develop and nurture a corporate conscience and to foster corporate responsibility, social goals of the corporation, where the social goals of the corporation and the profit motive and the-I think we have to remember, there has to be a profit motive or the whole thing comes apart.

Where do the social goals let off and the profit motive reappear?

Dr. Adams. At this stage, most of the Federal legislation that has encouraged corporate social responsibility has come into being because corporations on their own, and voluntarily, have not been behaving in socially responsible ways.

Some people have said it's not possible for a corporation to behave in such a responsible way, given the profit motive. Other witnesses before this committee argue that profit should be the standard of corporate activity and that they should not be required by the Government to behave in socially responsible ways.

Now, there is considerable argument in this area, because it is possible, by legislation, to create the conditions which it becomes profitable to behave in a socially responsible way.

The solution to this problem usually requires a specific study of a specific set of companies in an industry and the effect on their costs, of Federal regulations of social responsibility. Air pollution and water pollution are probably the best examples, and they are the ones on which the council has done the most work. You can argue that companies which install air pollution control equipment that meets Federal standards early, gain a competitive advantage over firms that wait or are irresponsible in their air pollution control.

You can also argue that the building and selling of pollution control equipment is itself a profitable activity for some corporations. Thus, in a sense, by Federal regulation, you have created the conditions for profitable air pollution control.

So, there are conditions under which Federal legislation actually allows greater competition, profit, and greater corporate social responsibility. The data is incomplete, however. Some firms argue that air pollution equipment has been extremely expensive for them, cut into their profit margin, and reduced their sales potential.

The answer to your question, Senator, depends on effective research and effective research depends, in turn, on disclosure.

Senator DURKIN. Who is going to do their research? The corporation for Federal charters? You say disclosure can be handled with existing agencies.

Dr. ADAMS. Yes.
Senator DURKIN. Who is going to do the research in Congress?

Dr. Adams. Congress does research now. There is no reason it can't get into this question. However, as I said in my statement, we are not coming here and asking the Federal Government to assume responsibility for using disclosed information. We have a very strong commitment to staying in existence ourselves and using that information to do research.

Senator DURKIN. You kind of fudged the answer on "where does the social responsibility of the corporation collide with the profit motives?”

I had some personal experience with a nonprofit corporation and it turned out to be a nonincentive corporation. I spent 5 years battling with Blue Cross and Blue Shield. They had no stockholders. The board's captive. The president reviews the board and picks the board. Their idea of a consumer is anyone who isn't presently wearing a surgical gown.

There was no social responsibility. There was no profit motive. We seem to draw the worst out of both goals.

Dr. ADAMS. I must say

Senator DURKIN. I lost where you divided between the social responsibility and the profit incentive.

Dr. Adams. Yes. I'm not sure I can really address myself to the Blue Cross-Blue Shield example. But I think you can count on one thing, Senator. In a unified country, all of the population is responsible for working on and understanding these questions.

Corporations have already the resources to do research in their own interest and do a great deal of it. Corporations also receive $9 or $10. billion a year in Federal research and development money to do research, so they have plenty of resources.

Groups such as ours have fairly limited resources which we have to go out and raise, but we are committed to doing this work because we do not in fact work to further the profitability of any one corporation.

The Federal Government also has extensive research activities. They, too, could use disclosed information under the regulations that I am proposing this morning.

Senator DURKIN. You are not necessarily arguing for the creation of Federal chartering. You are saying that an enlightened, aggressive government, by more responsible administration, could get the information to the existing structures, could use the structures that now exist to provide more research, provide more data to enable the corporations to plan. So, you are really arguing against creation of any

Dr. Adams. No. I'm arguing neither for it nor against it. I am proposing even more extensive disclosure than that proposed in the Federal chartering idea.

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