ADDITIONAL ARTICLES, LETTERS, AND STATEMENTS UNITED MINE WORKERS OF AMERICA, Hon. WARREN G. MAGNUSON, DEAR SENATOR MAGNUSON: This letter is written in support of the objectives of Ralph Nader's proposal for federal chartering. The Commerce Committee is to be commended for initiating a serious national discussion of the myriad problems inevitably associated with our present haphazard and competitive system of creating and regulating corporations. Federal chartering, with appropriate provisions for democratic corporate goverance, protection of stockholders, employees, communities affected by the businesses and taxpayers, provides a solution to the problem of control of corporations by incestuous management autocracies. These undemocratic groups easily lead to daily violations of employee rights to freedom of speech, association, and safety in the work place, and to the absolute dependence which communities, from Alloy, West Virginia to New York City, must place on the whims and threats of major employers. Individal state laws do not work to ameliorate the problem; instead they exacerbate it. No single state can enact the vitally necessary regulations because those businesses chartered in that state will recharter in a state which has, like Delaware, sold its laws for corportion tax revenues. I particularly wish to call attention to the need in any viable and effective federal chartering program for securing the rights of both employees and communities in their dealings with the giants of industry. The need for greater attention to the debilitating and often killing conditions under which many American workers labor is evident. From the coal field we witness repeated disasters that need never have occured if people had been placed first, rather than profits or productivity, by greedy corporations and incompetent and ill-motivated bureaucrats. In the heavy industrial center of our nation, American citizens are dying of diseases never before encountered by medicine, diseases which murder and which are the direct result of a cold spirit of unconcern in the executive suites. Profit again is placed above people in industry after industry as PCU and PCB enter the bodies of chemical workers, as asbestoses strike the lungs in insulation workers, and as black lung deals death to coal mine workers who labor to meet our energy demands. Further, no one is fully safe in his or her right to speak, to criticize management (witness the experience of men who have blown the whistle on nonperforming military hardware or unsafe unclear plants), or to freely join in association with other similarly minded individuals for social, poiltical, or labor union purposes. Additionally, the communities which frequently depend upon a single employer for all or the bulk of their jobs and income, almost inevitably find themselves politically, as well as economically, subservient to that industry. The legends of the brutality and injustice of company towns are founded on fact-fact which continues to this day as few cities are free of the insidious influence or threats of a coal, steel, automobile, textile, aircraft, or similar industry. These firms foul the air, destroy the streams, dodge fair assessments of taxes, block progressive legislation and generally conduct themselves in a manner befitting a 12th century feudal lord. No one proposal, including federal chartering in general, or the Nader proposal specifically, will solve the plethora of problems smothering America's towns and cities. But the proposal before this committee is a major sride in the correct direction and the United Mine Workers of America endorses its goals and principles. With your permission, Mr. Chairman, I would like for this letter to be inserted in the public record of the Commerce Committee's hearings on federal chartering and corporate responsibilities. Sincerely, ARNOLD MILLER. Hon. WARREN G. MAGNUSON, CONGRESS OF THE UNITED STATES, Chairman, Senate Committee on Commerce, 128 Russell Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: Would you be so kind as to include the enclosed statement in the record of the Commerce Committee's hearings relative to corporate chartering. Sincerely, Enclosure. JAMES V. STANTON, SUPERCORPORATIONS TOWER ABOVE THE LAW-BY JAMES V. STANTON The American economy needs to get off to a new start if we are to bring down high prices and relieve unemployment. But the new start can be made only when we wake up and realize that the people hold the ultimate power in this country. The people are in possession of the law and no individual can escape it or set it aside. We are not stuck with an Indira Gandhi here; we did (past tense) have a Richard Nixon. We congratulate ourselves about this. But why? While we haven't handed over the law to any human person in the United States, not even a president, the fact is that we have ceded it to a whole class of artificial persons who manipulate the law as if it were theirs. And, out of apathy or an inferiority complex, we let them get away with it. These "persons" are the mammoth corporations. We have procreated themin a process that once reminded Justice Brandeis (Ligget Co. vs. Lee) of "the Frankenstein monster." These robots grow by feeding on each other, through a diet euphemistically referred to as "corporate mergers." Two things happen as they become super-heavyweights. First, they get so big that they tower above the antitrust laws. Second, doing what those laws are supposed to forbid, they dominate key industries (having gobbled up most of their competitors) and enter into "sweetheart" relationships that prove lovely for them but not for the people. The public pays a price for such romance. In the oil industry supercorporations that pretend in their advertising to be rivals actually hold hands offstage in "joint ventures." In the food industry we have a bully, ITT Continental Baking, effectively fixing the price of bread in regional markets, while just four cereal manufacturers corner a national market, fattening themselves on a soggy form of competition. In the auto industry, demand goes down but prices go up as the few remaining manufacturers politely follow their leader, General Motors, on pricing policy. The workers are laid off because cars won't sell: prices are too high. Simply put, the old-fashioned economic law of supply and demand just doesn't work in the oligopolistic industries. The Joint Economic Committee of Congress noted recently: "When demand declines, prices tend to remain fixed at high levels or rise further in the concentrated industries. The long-term trend in the concentrated industries has been steadily rising prices." Anyone who reads this as the diatribe of a Democratic-controlled Congress ought to listen to what the Republicans, too, are saying. Arthur Burns, Federal Reserve Board chairman, laments: "Prices no longer behave as they used to." The Justice Department, coming alive under former Atty. Gen. William B. Saxbe, asserted: "Only through free competition can we produce the things we all need at prices we can all afford"-and: "Business firms who fix prices rob the public as surely as those who rob at the point of a gun. The Department of Justice will not look the other way." Meantime President Ford, clearly seeing the link between inflation and oligopoly, asks Congress for more money to strengthen antitrust enforcement. But, unfortunately, there is nothing new about the government wheeling out its big legal guns to blast away at the supercorporations. The fact is that Uncle Sam has been cannonading off and on since 1890, when the Sherman Act was passed. But this has been a no-win war. Some politicians have won glory in the fighting as "trustbusters": lawyers have profiteered from it: some corporations claim to have been martyred. But there rarely has been any blood on the floor-no oozing of corporate financial substance except what was recoverable, to be reconstituted elsewhere. In fact, every time the smoke clears we find the supercorporations largely intact, with the people all the poorer for having picked up the court costs. This result is always predictable. The Sherman Act, as every lawyer knows, is so obsolete as a legal weapon that it is almost inoperable. The supercorporations know how to get around it. They stall and they survive. IBM tied up the government for six years in delaying actions before its antitrust trial finally got going last spring. The big oil corporations, accused in 1973, have counterattacked with batteries of lawyers-who ought to be able to put off that trial at least until 1978, if not beyond. (And then would come the appeals.) Since 1960, the Justice Department has brought at least 20 actions against the steel companies, with results that are hardly discernible. The Corporate Citizenship and Competition Act, which I introduced May 22, 1975 (Congressional Record, page H-4648), would be the kind of law that would put an end to this guerrilla warfare. With a built-in timetable, it would force the corporate heavy weights to stand and fight, round for round, under rules that would dictate a quick and final decision. It would adopt a new strategy for restoring competition in key industries by holding, in effect, that an anticompetitive market structure in such industries is illegal per se, however it came to be. It would take its cue from Burns' warning: "We urgently need to revitalize competition in our economy through structural reform." This is the kind of reform that would cut down the big oil companies and other behemoths of the corporate world, dissolving oligopolies to allow relatively small businesses to enter the market and compete for consumer dollars by offering lower prices. Action would not be precipitate under this bill. The corporations and all other interested parties would have their day in court, as it were, but the day could not be stretched to a decade. Anyone who is familiar with political realities and the legislative process knows that a hurry-up lynching of a powerful corporation is virtually impossible under our system. There would be a full and fair trial of the facts. I have been asked whether the time is ripe for such a law. I think it is-providing that the people are ready to assert themselves, providing they are not so turned off with the political process as to suppose that they have no usable power. A president has fallen; this alone ought to teach us that the ITTs of this country cannot be invincible. But first we have to see the supercorporation in its true light. While legally it is a "person," entitled to rights under the law, it is not more a person than we are. It is not immortal, endowed with some inalienable right to live on forever as presently constituted. It may or may not be "the Frankenstein monster" that frightened Justice Brandeis, but no one can deny that it exists only as a creature of the government, which is to say, the people. Corporations achieve birth through charters granted to them by state governments. In fact, some state governments, notably Delaware, specialize in corporate pregnancies. They hand out charters promiscuously, in exchange for fees that fill the state treasury. Corporations prefer a parent like Delaware because such states agree beforehand to be permissive and to exercise little supervision. The incongruity of it all becomes evident when we contemplate the fact that the mammoth corporations do business in all 50 states, and around the world, and yet are answerable for their charters only to a single state that is so impercunious that it is dependent on its offspring. So, pursuant to the constitutional mandate that Congress, not the states, regulate interstate commerce, the Corporate Citizenship and Competition Act would require federal charters for the 100 largest corporations-those with annual sales exceeding $2 billion. The founding fathers and, later, William Howard Taft, Theodore Roosevelt and Woodrow Wilson, advocated federal charters. I believe the time has come to revise these proposals, to examine them in the light of modern conditions. Because federal charters would delimit the scope of the company's operations, they could be used as a tool to reorganize the vital industries of the United States in the way that would make free enterprise truly free. This is the new start that we need. STATEMENT OF THE U.S. INDUSTRIAL COUNCIL The United States Industrial Council is an organization representing 3.500 business and industrial firms which together employ more than 3,000,000 people. It is dedicated to preserving and strengthening the free enterprise system which is the source of our strength as a nation. Our free enterprise system has given the people of the United States the highest standard of living of any country in the world. It has produced a wealth of goods and services at prices which make them readily available to the average citizen. Despite its remarkable achievements, there are those who are bent on radically changing the system, among them being the advocates of federal chartering of major corporations. They are urging enactment of legislation which would use federal chartering as the means of restructuring these corporations, supposedly to make them more "accountable" to the people. Leading and directing the attack on our major companies are Ralph Nader and his "Corporate Accountability Group.” The legislation they propose would wreak such havoc on our free enterprise system that we find it appalling that one of the major committees of the Congress would dignify their proposals with a public hearing. The federal chartering legislation would be a big step toward nationalization of private business in the United States. Under the proposed legislation, in order to obtain federal charters permitting them to engage in business, corporations with $250 million or more in annual sales would have to so alter their management structure and operating procedures that free enterprise forces no longer could come into play. In the book, "Constitutionalizing the Corporation: The Case for Federal Chartering of Giant Corporations" of which Nader is a co-author, it is alleged that corporations have "escaped the kind of accountability that the democracy imposes on its centers of power." We can find no basis in fact for that statement. Corporations are accountable to the public by reason of a multitude of laws already on the books, placed there by the public's elected representatives. They are subject to the antitrust laws, the rules of the Federal Trade Commission, the Environmental Protection Act, the Occupational Safety and Health Act and numerous other laws and rules administered by a score of government agencies. As a result, the rights of corporations have been severely limited. Corporations likewise are accountable to their Boards of Directors and their stockholders. But even more important, they are accountable to the public on which the corporation depends for sales of its goods and services. If a corporation does not provide the buying public with the quality of products and kind of service it wants, it can put the corporation out of business by withholding patronage. That is the ultimate accountability which the private enterprise, free market system imposes. Government intervention distorts this "selecting out" process. What is needed in the public interest is not more government intervention, as would occur under federal chartering of corporations, but less. In their book advocating federal chartering of corporations, Nader and his co-authors ask "if big business today is so good, why are things so bad?" With the American people enjoying a standird of living that excells that of all other countries-with this nation spending billions of dollars every year to help nations less fortunate than ourselves-on what basis can things be said to be "so bad" in the U.S.A.? The period of inflation and unemployment which this country has been undergoing is seized upon as an excuse for restructuring large corporations. Inflation and maladjustment of the economy was brought on by excessive government spending and borrowing, plus high energy costs due to oil price increases in the Mid-East-not by U.S. corporations. Furthermore, the rate of inflation has been lower in this country, by and large, than in nations which have placed restrictions on free enterprise like those the advocates of federal chartering of corporations would impose. In the book we have referred to, the authors speak of a "corporate crime wave" and refer to major business enterprises as "this rogue elephant in our midst." What is this crime wave? A handful of corporate executives have admitted paying bribes to officials of foreign governments in order to be permitted to do business in their country. While we do not condone this practice, of asking for and receiving bribes, it has been an accepted way of life in many countries for generations, and the payment of bribes by U.S. corporations in those countries must be considered in that light. A few corporate executives have made political contributions in contravention of the law. We do not condone that practice either, but at the time it occurred it was condoned by a great many people, including some of the most prominent members of the United States Senate who accepted such contributions. These violations of law involved only a tiny percentage of the corporate executives in this country. They occurred in the past in a climate different from that which prevails today. If they are what Nader means by a "corporate crime wave," he has distorted them into a vicious charge of widespread corporate criminality that simply does not exist. Another distortion is found in the basis used for the claim that federal chartering would be "Constitutionalizing" the corporation. In the Nader book on that subject, it is asserted that the Constitution's "silence about giant corporations" was due to the fact that at the time the nation had an agrarian economy, the inference being that the Founding Fathers simply overlooked the need for federal intervention into the operation of large-scale private enterprises. History is quite clear that the Founding Fathers believed in limited government, individual liberty, and permitting free men to conduct business in a free market. The people who founded this country deliberately and wisely kept laws unduly limiting the operations of corporations out of the Constitution. So much for the rationale for federal chartering of corporations. We turn now to some specific provisions which Nader and his followers would like to have included in proposed federal chartering legislation. Most of them are directed to circumscribing the rights of corporate managers to manage the affairs of the corporations. One of the ways in which this would be done would be the creation of full-time, fully staffed corporate boards of directors. Placed on these new boards would be "public" representatives, union representatives, and others with little or no experience or knowledge in running a big business enterprise. They would be able to interfere with and overrule the decisions of men who have spent their lives in developing knowledge and experience in corporate management-who worked up to their management positions step by step, being forced to prove their ability at each stop along the way. The federal chartering law would make top corporate management jobs so undesirable from several standpoints that it would be difficult to obtain qualified people for these demanding jobs. They simply would not be worth the risks involved. Managers could be sued by shareholders alleged for "negligence" in performing their jobs. Corporate executives would be subject to arrest and trial for violating provisions of the chartering act and subjected to fines, which proponents of the legislation say should be calibrated to the annual sales of the corporation If convicted, they would not be allowed to serve as an officer or director of a corporation for five years. The consequences of replacing able, experienced corporate management with a board of the type envisioned by the federal chartering advocates are not difficult to imagine. The errors, the inefficiencies-magnified to tremendous proportions in a large-scale corporation-would threaten the investment of millions of stockholders. Quality of products would decline and prices would increase. Consumers would be hurt most. Another provision of the proposed legislation is increased disclosure of confidential corporate operating information. Much corporate information already is available to government agencies which regulate corporations in various ways and can be obtained by interested persons from those agencies. The chartering advocates would go further and force corporations to reveal information which has been considered proprietary, with the owners having the right to safeguard it. Forcing the release of this kind of information could cause serious financial loss to a corporation. Furthermore, by making a corporation's trade secrets available to its competitors, competition would be diminished rather than enhanced. The so-called "free speech rights" which the legislation would confer on employees would seriously infringe management right and could produce a kind of anarchy among the employees of a corporation. Employees would be protected against any disciplinary action by the corporation for making accusations against their employer to legislatures, law enforcement agencies, or directors. The corporation could not maintain any kind of confidential personnel files, since each employee would be permitted to look at his corporate personnel file whenever he wished. One of the most absurd provisions of the proposed legislation is that which would authorize communities to "expel" the facilities of a corporation from their midst by popular vote for creating a "health emergency" It makes as much sense as authorizing a neighborhood to expel one of the neighbors because their garbage drew flies. The legislation would further endanger the financial stability of corporations by liberalizing the provisions for, and thus encouraging, class action suits by consumers, workers and stockholders against "unresponsive corporate bureaucracies". |