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.

Senator DURKIN. My question is, you don't have to go all the way down that road to get disclosure?

Dr. ADAMS. Absolutely not. The one area, as I suggested in my testimony, where Federal chartering would be useful is in providing a legal arena within which the Federal Government and Congress could define the public interest as it relates to the chartering of corporations. Senator DURKIN. It can get all the players in one room, I guess? Dr. ADAMS. Yes. And that is, I think, an argument in its favor. Beyond that, I'm not at all sure that Federal chartering is a guarantee of corporate responsibility.

Senator DURKIN. Do you think the SEC's increased requirements of disclosure has changed corporate behavior?

Dr. ADAMS. I can't answer that question. I have done no research on it.

Senator DURKIN. Has the fact that it made it easier to sue the board, has that had an impact on corporate behavior, that pervasive threat of suit, the fact that your liability carrier might no longer provide coverage?

Dr. ADAMS. Again. I have no systematic data, having done no research in that area. I suspect they are merely nervous about legal fees.

Senator DURKIN. Can you offer any explanation in your experience why this last week that the business round table and corporate round table turned the Senate on its ear to defeat the antitrust bill!

Dr. ADAMS. I'm not familiar with the bill, Senator, so I would rather not comment.

Senator DURKIN. Because we keep hearing, there is competition for widows, and there is competition for the handicapped, but there is a fear and apprehension when someone starts talking about competition amongst the major corporations.

Dr. ADAMS. I'm somewhat familiar with that situation in the airline industry. You do find, with one or two exceptions, that the airlines resist the efforts to deregulate, because they are much more comfortable with a situation in which regulation perpetuates a very small number of firms, at a very set price for their dealings with the public. That is not an unprecedented example of what happens within regulatory agencies and industry. A large concentrated regulated firm will have done a great deal to build themselves into that regulatory structure and to interchange their personnel on a fairly regular basis with the regulating groups. They resist very heavily the deregulation proposals of the current administration or of any other administration, for that matter.

Senator DURKIN. I think we are coming to the time for a natural break.

Dr. ADAMS. Thank you.

Senator DURKIN. I appreciate, on behalf of the committee, your taking the time to be here."

I apologize for any delays. If the business was run the way we run this place, there would be no profit or social responsibility.

I have got to go vote.

[The exhibits referred to follow:]

EXHIBIT A

RECOMMENDATION OF THE INTERAGENCY STEERING COMMITTEE ON UNIFORM CORPORATE REPORTING

Definitions

MODEL CORPORATE DISCLOSURE REGULATIONS, JANUARY 1975

Annual reporting.-The term "annual reporting" means as of December 31 of each calendar year.

Control. The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a person, natural or artificial. Sources of power may include, but are not limited to: equity security ownership; debtholdings; sole or partial voting arrangements; common directors, officers, or stockholders; or lease, purchase, lines of credit, supply, distribution, or operating agreements.

Financing lease.-The term "financing lease" shall refer to any lease which during the noncancelable lease period, either (1) covers 75 percent or more of the economic life of the property or (2) has terms which assure the lessor of a full recovery of the fair market value (which would normally be represented by his investment) of the property at the inception of the lease plus a reasonable return on the use of the assets invested subject only to limited risk in the realization of the residual interest in the property and the credit risks generally associated with secured loans.

Parent of Respondent.—“Parent of respondent" shall refer to every firm, holding company or other person or combination of persons who ultimately control the respondent, as well as any intermediary controlling entity.

ANNUAL REPORTING REQUIREMENTS

1. Corporate Structure.

(A) For each respondent, parent of respondent, subsidiaries (and/or organizations controlled) of the respondent, joint ventures involved in by the respondent, and subsidiaries (and/or organizations controlled) of joint ventures involved in by the respondent, the following information shall be submitted: (1) Name and address

(2) Basis of control

(3) Principal business activities

(a) List and describe by 4-digit SIC Code and short title each industry in which the respondent's activities generated 10% of gross revenues or $5 million dollars (during the reporting year). 4-digit industry SIC codes & short titles are listed in the most recent Standard Industrial Classification Manual as published by the Executive Office of the President, Office of Management & Budget.

(b) 4-digit SIC Codes and short titles should be listed in order of significance relative to the total activities of respondent, based upon the percentage of gross revenues generated within each 4-digit industry.

(4) Copy of the latest balance sheet and income statement and consolidated balance sheet and income statement, if available.

(5) A copy of any chart or other graphic material showing the relationship of the respondent to such parents, the subsidiaries, and other organizations listed. (B) In addition to subparagraph (A) above, list every corporation partnership, or other business organization in which the respondent owns more than five percent of the outstanding voting securities or other ownership interests and indicate the percentage so owned.

II. Voting Stock Ownership

(A) In descending order, the 30 largest holders of voting shares (not to include any holder with less than one-tenth of one percent of the outstanding shares) in the respondent, identified as to

(1) name

(2) address

(3) type (bank, broker, holding company, individual or other specified category)

(4) the number of voting shares held (as of the end of the calendar year) and its percentage relationship to total outstanding shares. (If some shares-such as preferred issues-carry limited voting rights describe the limitation and the number of shares affected.)

(In determining the number of shares held, all nominee and other accounts of each shareholder, including accounts held by depository trust companies (CEDE & CO., SICOVAM, Pacific Coast Stock Exchange Clearing Corp., Midwest Stock Exchange Clearing Corp.) shall be aggregated and reported as one account in the name of the bank, broker, holding company, individual or other indentified shareholder.)

(B) With respect to each of the 30 largest holders, the number of shares (and percentage relationship to total outstanding voting shares) over which the holder has

(1) sole voting power

(2) shared voting power (if voting power is shared with any of the thirty largest shareholders, identify the shareholder and the number of shares held) (3) no voting power under any circumstances.

(C) With respect to shares over whch the stockholder has no voting power, the name and address of the person(s) empowered to vote the ten largest blocks of stock, the number of shares and the percentage of stock in relation to the total outstanding voting shares.

(D) With respect to the 30 largest holders of voting shares in any parent, holding company or other organization or person controlling the respondent, provide the information required in subparagraph (A), (B), and (C) above.. III. Affiliations of Officers and Directors

(A) The name, address and social security number of each of the principal officers and each director, trustee, partner or person.

IV. Debt Holdings

(A) A description of each long-term debt (debt due after one year) of the respondent in excess of one million dollars, including the name and address of the creditor, the character of the debt, nature of the security, if any, the date of origin, the date of maturity, the total amount of the debt, the rate of interest, the total amount of interest to be paid, and a copy of any and all restrictive covenants attached to the indebtedness (where such indebtedness is widely held, such as bonds and debentures, provide the name of the trustee in place of the creditor).

(1) With respect to each holder of more than five percent of each issue reported provide the name, address, and type of holder-bank, broker, holding company, individual or other specified category and amount of debt held.

(B) A description of each short-term debt (under one year) excluding accounts payable to the respondent, including the name and address of the creditor, nature and character of the liability, period of the debt, rate of interest, total amount of such short-term debt, nature of the security, and date when debt was paid, or date when such debt must be paid, and a copy of any and all restrictive covenants attached to the indebtedness.

(C) A description of each financing lease arrangement, equipment trust, conditional sales contract, or major liability with respect to the capital assets of the respondent and involving aggregate payments in excess of one million dollars and a copy of any and all restrictive covenants attached to the indebtedness.

EXHIBIT B

RECOMMENDATIONS FOR CONTENT OF SEC REPORTING REQUIREMENTS Excerpt of Testimony by Alice Tepper Marlin, Executive Director, Council on Economic Priorities to Securities and Exchange Commission, May 2, 1975.

A. ENVIRONMENT

There are four major areas of corporate activity which have a significant impact on the environment: industrial production, land use, transportation and distribution systems, and product choice. The Council's experience has been primarily in the area of industrial production, where we have focused on pollution and pollution control performance. We would like to limit our com