HD 2715

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Washington, January 27, 1909.

SIR: I have the honor to submit herewith the report of the Commissioner of Corporations for the fiscal year ended June 30, 1908. During that year there has been no legislation directly affecting the Bureau.

The total appropriations for the Bureau for that year were $247,720. The appropriations for the present fiscal year (1909) are the same. There has been an increase in the number of employees in the Bureau since its organization, beginning with 64 at the end of the fiscal year 1904, 74 in 1905, 73 in 1906, 97 in 1907, and on June 30, 1908, the force consisted of 131. This increase of force has been found absolutely necessary to carry out the extensive work of investigation devolving upon the Bureau.


The most important legal work of the Bureau in the last fiscal year was in connection with a bill for the amendment of the Sherman law of 1890. The Bureau also rendered assistance in the preparation of certain other bills. A very large amount of work was also done in aiding the Department of Justice in the preparation for trial of cases against the Standard Oil Company and certain of its subsidiary concerns for violations of the antitrust law and for practicing discriminations in railway rates. Work has also been done in cooperation with certain prominent writers on legal topics, whose services have been secured for this purpose, to prepare for publication certain features of the corporation laws of the various States. This work is not yet finished.


(1) On May 5, 1908, a report was published giving the results of the investigation of patents granted to officers or employees of the United States. This was in response to a joint resolution of Congress February 18, 1907.

(2) On August 5, 1907, the Bureau published its third report on the petroleum industry, entitled "Prices and Profits." This report dealt with the results of certain methods of the Standard Oil Company. Previous reports on this company published on May 2, 1906, and May 20, 1907, respectively, had set forth certain business methods of the Standard Oil Company. This third report (Prices and Profits) shows the result of these methods on the consumer as to prices and on the Standard Oil Company as to profits.

(3) The Annual Report of the Commissioner of Corporations for the fiscal year ended June 30, 1907, was published December 9, 1907, and set forth certain conclusions as to the general policy of the Bureau and the work of the Government in connection with the regulation of corporations.

(4) On December 30, 1907, there was published a statement of the Commissioner of Corporations in answer to the allegations of the Standard Oil Company concerning its conviction at Chicago for accepting concessions on shipments over the Chicago and Alton Railroad. This statement discussed the allegations of the Standard in its pamphlet entitled "From the Directors of the Standard Oil Company to its Employees and Stockholders."

(5) On May 4, 1908, was published Part I of the Report on Cotton Exchanges, this part dealing with "Methods of establishing grade differences for future contracts."

(6) On May 29, 1908, was published Part II of the Report on Cotton Exchanges, dealing with " Classification of cotton," and Part III therof, dealing with "Range of grades deliverable on contract."

There are now on hand in the Bureau, as current work, investigations on the following subject-matters: Tobacco industry, steel industry, International Harvester Company, lumber industry, cotton exchanges, and water transportation.

At the request of the National Conservation Commission recently appointed by the President, certain of the work of the Bureau already on hand was prepared with special reference to the needs of that commission, and also certain other work has been taken up for that commission, especially that on timber stumpage in the lumber investigation, inland waterways, and a recently initiated inquiry into the developed water powers of the United States.

In the last five years the country has made great progress in the problem of corporate regulation. As a result of the work already done, we are now, I believe, in a position to make a further and very definite advance in our general policy.

Three considerations should guide that advance:

(1) That the real issue is, What are the intent, methods, and effect of a given combination or corporation? What a great corporation

does and how it does it is of far more practical importance than the mere question whether it is legally a combination or not.

(2) That the first step in such an advance must be to establish a broad system of corporate publicity through a federal office.

(3) That the system adopted shall provide, as far as possible, a basis for the conference and cooperation of all interests.

There is an irresistible movement toward concentration in business. We must definitely recognize this as an inevitable economic law. We must also recognize the fact that industrial concentration is already largely accomplished, in spite of general statutory prohibition.

Recognizing these facts, the aim of new legislation should be to regulate, rather than to prohibit, combination. It is an obvious absurdity to attempt to do both at the same time, and prohibition has practically failed. Our present law, forbidding all combination, therefore needs adaptation to the actual facts. It is now inflexible and indiscriminate. It takes no account of the intent, methods, and results of combination. It often operates against concerns which are morally and economically beneficial, while its defects admit of its easy evasion by corporations whose purposes and results are largely indefensible. In prohibiting combination agreements it has gone far to drive corporations directly to the most extreme and complete form of consolidation. In short, as a practical scheme for the handling of the present corporation problem the sweeping prohibition of the antitrust laws has been altogether unsatisfactory.

If we are to do anything effective with the corporation question, we must make an advance on our present legislation. The practical object is to see that business opportunity and the highways of commerce are kept equally open to all; to prevent fraud, special privilege, and unfair competition.

To do this we must recognize concentration, supervise it, and regulate it. We must do this positively, through an active federal agency, and not merely by the negative prohibitions of penal law. We must have cooperation with corporate interests as far as possible. We must have, of course, effective penal laws against specific forms of unfair competition, and the misuse of monopoly powers.

Above all, we must have a system of efficient publicity. This is the strongest means for our purpose.


Efficient publicity" means that sort of publicity which reaches the average citizen under everyday conditions. The mere publication of large columns of facts and great masses of figures is not enough. The average citizen will not use such material. A permanent office, after collecting such material, must also summarize it for the public in brief, clear, and reliable conclusions, showing important permanent corporate tendencies.

The Bureau of Corporations has been working on this line for five years. Its experience has shown what such publicity will do. When the great system of secret and semi-secret railway discriminations enjoyed by the Standard Oil Company was made public by the Bureau in 1906, the railroads concerned therein at once voluntarily canceled every rate thus criticised as illegal. Again and again the mere exposure of improper business methods has led to their abandonment without any further action.

But now the work of the Bureau of Corporations is necessarily restricted to a comparatively small scope. The control by the Federal Government should be broadened into a general constructive system based on these tested principles of supervision, publicity, and cooperation.

The details of such a system can be the subject of much difference of opinion, but its main features should be as follows:

(1) It should be operated by the Federal Government. The United States is the only power competent to carry out such a plan of regulation. Corporate business has become national; its regulation must also be national. No considerable number of States can agree on any one system. No one State alone can make its own system effective.

(2) It should provide for a system of regular reports from the large interstate corporations. These reports should be made to an office of the Government. They should set forth the financial condition, business organization, and corporate transactions of the company.

(3) Such government office should have access at all reasonable times to the records and accounts of such corporations.

(4) That office should publish concisely the important facts and tendencies thus disclosed, so far as the same are of public interest. It should safeguard, at the same time, from publication all proper business secrets.

(5) Corporations complying with these requirements should be given the advantage of a definite federal registration, thus reaping the benefit of a public standing as concerns with open accounting and not afraid of publicity.

(6) The system should, if possible, be voluntary. It should not be compulsory if a voluntary system can be made effective. It should be of such a character that large corporations in general will prefer to enter into it, thus making the principle of cooperation the primary one rather than one of compulsion.

(7) It should recognize the basic fact above pointed out, that the Government can not at the same time both prohibit and regulate corporate combination; that if it elects to regulate combination, it must

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