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stances enables interchange and common understanding along the 'street' to perpetuate control by those who may not, in fact, have a dollar of actual stake in an enterprise. It has been proposed to disfranchise such floating stock. It might be serviceable; but the practical difficulties in the way of carrying out such a plan seem to me insuperable.

VI

This present tendency to strip the public shareholders of their voting rights may be checked, either through revision of our corporation laws, or by a vigorous attitude on the part of the courts. Direct action by the investing class, by boycotting all such offerings of securities, may give even more immediate results. But, in either or any event, no other safeguard against misuse of power by insiders is so likely to be effective as publicity. Nothing kills bacteria like sunlight. A frank sharing of all proper information with the main body of the shareholders is basically right. It is also in the long run a matter of good business. It is absurd that, as has so frequently happened of late, corporate results of operation should be given to the real owners, not every month, not even twice a year, but only superficially in an abbreviated annual report. The stockholders are entitled to know the amount of gross business, the cost of conducting it, and especially the policy as respects depreciation and upkeep in full detail, in order that they may benefit by the intelligent judgment which competent experts will then speedily pass upon the real status as to net earnings. The United States Steel Corporation and the American Telephone Company are forthstanding examples of the value of such frank publicity, as a recommendation to the world at large of an investment; and any corporation which pursues the

opposite course thereby invites and deserves distrust and suspicion. Yet it is unfortunately true that the policy of some of the charter-mongering states - Delaware, West Virginia, and the rest rest has been to discourage, rather than to develop such full disclosure of the state of affairs. For private corporations, the present situation as concerns stockholders' rights to information is most unsatisfactory.

Our experience with railroads is significant in this connection. They still deserve and require a greater measure of liberality in the matter of rates than has yet been granted by the Interstate Commerce Commission. But, this step once taken, they will be at last well on the road to a safe and stabilized investment for the great body of the people. It is clear already that the best of them are slowly assuming their rightful place in this regard, forging steadily ahead through the turbulence of speculation in so many other forms of enterprise. For speculation germinates in and thrives upon mystery. It is indubitable that this stabilization, even though it is yet on a subnormal plane, is largely the result of the complete publicity and standardization of railway accounts under Federal supervision. Several million investors may well be content to leave the management of their railroad possessions in the hands of others, knowing that, quite apart from the regulation of rates, this standardized publicity permits a scientific check, month by month, upon policy and results. How different is this from the manner in which even some of our nation-wide private industrial corporations do business all over the United States, cloaked and hooded like the despicable Ku Klux Klan. The clause of the Roosevelt New York Companies' Act of 1900 which, as a penalty for failure to render detailed and current reports of operation, proposed to

disqualify directors, making them ineligible for election for the period of a year, may be impracticable. Yet there may be the germ of an idea in the suggestion.

A brief address upon this subject recently, before the American Academy of Political Science, seems to have hit the crazy bone of a certain type of self-appointed spokesman of the quasi-public companies. The mere suggestion of governmental supervision, as applicable to them, in lieu of the vanishing rights of stockholders, was characterized — rather breathlessly, it seemed to me as an attack upon 'all American business as honeycombed with dishonesty and greed; and all executive management as fraught with irresponsibility, indifference, and worse

. . using the traditions of a great institution of learning to spread an exaggerated impression of American business the kind of propaganda on which demagoguery and communism feed.' The soothing allegation that a beneficent economic revolution is occurring by reason of the widespread diffusion of corporate ownership is said to be 'berated and rejected with a violence of invective and an indiscriminateness in denunciation that would make a Socialist orator blush for shame.' Fortunately I am privileged to introduce a witness in my own defense. The Committee on Public Securities of the Investment Bankers' Association of America reported in 1923 as follows: 'When administered with the broadest power, and in a judicial manner, statewide regulation of public utilities has been conclusively proved, in the opinion of your committee, to afford the best guaranties which investors can have in this country for a maintenance

1 The speaker is Henry M. Brundage, first vicepresident of the Empire State Gas and Electric Association and vice-president of the Consolidated Gas Company of New York.

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What, then, is the present status of governmental supervision over publicutility companies - other than railroads, telephones, and telegraphs — in the United States? The fact is that nearly all the commonwealths have regulatory bodies, most of them, however, having jurisdiction only over such matters as rates for water, gas, and electric light and power. The present situation, therefore, as respects these operating companies is quite reassuring. What concerns the future is the hierarchies of holding companies, superposed one upon another — the piling of Pelion upon Ossa to the seventh heaven. This is provocative of grave concern, for it is in the heights that the real sources of power find place. The experience of the little Boothbay Harbor company is entirely typical. But, to nail the conclusion, take the Pine Bluff, Arkansas, local operating concern. This is controlled by the Arkansas Light and Power Company, which is a part of the Southern Light and Power Company of Delaware, also controlling the Mississippi Power and Light Company, the Louisiana Power Company, and the Louisiana Power and Light Company. And the whole congeries of them has been in turn acquired by the Southern Power and Light Company, this time incorporated in Maryland, which seems to be a part of the Electric Bond and Share Company of New York. Being the proud and happy possessor of some shares in this lastnamed corporation, I am thrilled with

the sense of immediate participation in the local concerns of Pine Bluff, Arkansas! But that question has already been discussed from the point of view of the private owner. As concerns the public, it is self-evident that something besides superpower of electrical energy is entailed and that is the growth of interstate corporations which are superpower systems of a different order. And for dealing with them we, as a people, have no machinery whatsoever. Thus we are brought squarely to the perennial issue of Federal versus state authority. Whatever is to be done about the affairs, either of private corporations dealing in the necessaries of life in more than any one state in the Union, or with, let us say, the Associated Gas and Electric Company, which supplies 'electricity and/or gas and/or water, to over 300,000 consumers, serving a total population estimated at approximately 2,000,000 in more than 900 communities in New York, Pennsylvania, Maryland, Massachusetts, Connecticut, Vermont, New Hampshire, Maine, Kentucky, Tennessee, and the city of Manila,' must evidently be done on a larger basis than a single commonwealth affords. (In passing we may note that this Associated Gas and Electric Company has $36,600,000 in bonds and almost 500,000 nonvoting shares outstanding with the public. Control is apparently vested in 300,000 Class B shares, no par value.) An experiment is just now being forced upon the three states of Pennsylvania, New Jersey, and New York, concerning the creation of a Joint Giant Power Commission, by the growth of these great industrial units. Necessary they probably are! Sound, for aught that I know to the contrary, they are! But when one of them sprawls over the map from Aroostook County, Maine, to the Philippine Islands it is time to think what it means.

And the contention that such concerns are already thoroughly controlled or supervised in the public interest, because forsooth each of their local operating companies is subject to existing state laws, would seem to be rather effectually disposed of. This is one of those rare cases where two and two do not make four, but something well over a dozen. It is inconceivable that joint giant power commissions should be set up by different groups of states, each group corresponding to the especial scope and extent of the particular corporation which it is intended to supervise. The answer, alas, seems to be always the same. If anything needs doing, there is but one agency to which to turn-exercise of the Federal power.

There are already at Washington three agencies which may conceivably become involved in these matters under discussion. But the simple, the logical, the inescapable conclusion is that superstate public-utility companies should be placed under the jurisdiction, either of the Interstate Commerce Commission, as the telephone and telegraph companies along with the railroads now stand, or else under an amplified Power Commission, similar to the one in the Department of the Interior which at present concerns itself with the licensing of water-power companies. Whether their rates need to be, or practically can be, thus regulated is another matter. But that their accounts ought to be formally standardized and made public is beyond all possible question.

What, then, about the private corporations, when direct responsibility for their management by the shareholders seems to be by way of evanescence? Whether this tendency be arrested or not, a greatly added measure of publicity ought by all possible means to be stimulated. Standardized accounting for all private forms of business, already so successful in the case of rail

roads, telephones, and telegraphs, is probably hopeless of expectation. The variety of circumstance and the multifarious exigencies of each and every kind of business would present to any administrative agency a task transcending human power. And yet certain norms might well be set up by some such body as the Federal Trade Commission. To take a pressing instance: the present impasse, so far as bringing intelligent public opinion to bear upon the anthracite coal strike, might never occur again, were the recommendations of the Federal Coal Commission of 1922 respecting standardization of coal-mine accounts actually in force. The policy of what has been aptly termed 'induced cost accounting' might well be elected as part of a general campaign of education by some Federal body. Let us hope it will not be one possessed, as the present Federal Trade Commission seems to be, with a sole and apparently overwhelming disposition to commit hara-kiri!

A mighty and preeminently important duty is imposed upon the Federal Government by the general conditions respecting corporations which thus seem to be headed toward a climax. Whether the means for a restoration of responsibility shall be suggestively educational or strictly regulatory must depend upon circumstances. Perhaps we should revive the question of Federal incorporation, so ably advocated by President Taft in his special message of 1911. This, or a Federal license system whereby permission to engage in interstate commerce entails compliance with certain standards as to corporate structure and publicity, deserves attentive consideration. The report of the committee of the British Ministry of Reconstruction of 1911,2

2 This standard British Blue Book can be obtained through the British Library of Information, 44 Whitehall Street, New York City.

dealing more specifically with trade associations than with corporations, was a response to somewhat the same great need which is making itself felt at this time in the United States.

VIII

I would not conclude with the advocacy of any particular plan. The first duty is to face the fact that there is something the matter. For a remedy I am groping as yet, like a child in the dark. I am conscious that things are not right. The house is not falling down

no fear of that! But there are queer little noises about, as of rats in the wall, or of borers in the timbers. I believe that the trouble has to do with the growing dissociation of ownership of property from responsibility for the manner in which it shall be put to use. And now is the time for action. It is not yet too late. Millions of our citizens made this first essay in thrift as a result of the great Liberty Loan campaigns during the war. It has been estimated that of the 14,400,000 stockholders in the United States no fewer than 3,400,000 were added within the three years following 1917. This betokens a great incursion into the field of investment by the common people corporate possession being shared by those of moderate and small means with the wealthy class. The movement has been called 'an economic revolution' 'the passing of ownership from Wall Street to Main Street.' What would be the effect were these newcomers consumers, employees, or others- to discover some day that ownership and control had parted company, each going its way as ships that pass in the night? Suppose that the ownership of many industrial plants, great and small, continues to reside all through the countryside, but that the lodgment of the

power of direction has shifted to the

great financial centres. We have had experience, to our sorrow, with the old sectional divisions between the East and the West. Is there no smouldering spark in this matter of corporate control, which may some day flare up as a political issue of the first order? I do not look to Sentinels of the Republic or

to anti-syndicalist laws for the ultimate safeguarding of our institutions. Our security, in the last instance, must rest upon the ever-wider prevalence of what Lord Bacon held to be 'clear and round dealing among men!' With that assured, we may quite confidently leave all the rest to take care of itself.

ACCIDENTS IN THE NAVY

SAFETY FIRST OR EFFICIENCY FIRST?

BY WILLIAM S. SIMS

WHEN serious accidents occur in the navy, particularly when they involve considerable loss of life, it is perfectly natural that there should be more or less severe criticism in the press. Many of these criticisms are not deserved. Many people do not understand that one of the primary necessities of preparation for war renders the navy more liable to disastrous accidents than is the case in any of the industries. This lack of understanding of the greater risk in training the naval personnel to handle efficiently the various units of the fleet and its various weapons, under conditions resembling as nearly as possible those of actual warfare, was made apparent during the recent annual convention of the National Safety Council in Cleveland, which I attended.

The subject of safety being foremost in the minds of the delegates, many questions were asked as to the precautions taken in the navy for 'Safety First,' and many of the delegates were apparently surprised to learn that

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