Washington, January 31, 1910.

SIR: The deepest interest of this generation lies in the control of its dominant commercial forces. The issue is moral, involving deeply our American ideal of equal opportunity under the law. It is financial, and on its outcome depends the ultimate stability of our business system.

The corporation has become the accepted machinery for handling these forces. It is the artificial creature of the community. We have given it great powers and exemptions not permitted to the individual. We have made it effective. We have likewise made it capable of sinister misuse.

The corporation has concentrated enormous commercial power in the hands of a few men. At the same time it has lessened their personal responsibility for the proper use of that power. Sense of personal obligation to the community becomes submerged in vast corporate entities. The resulting abuses call for some restraint that shall take the place of the old personal obligation. Government supervision and publicity of corporations must be that substitute. The issue is national; action by the Federal Government is imperative under its unquestioned power and duty to regulate interstate commerce. The Federal Government is the only adequate authority; one of the primary motives for its creation was for a national control of national business. Those directing our great corporations have deliberately nationalized them in size and scope; they can not now be heard to object to a centralized control which they themselves have made necessary. They have made their businesses truly governmental in their effect on the people. They can not now deny that the Government is concerned therein.

As guardian of the nation's welfare, the Government must see to it that the ordinary standards of right and fairness, which restrain our individual citizens, shall also be applied to our great modern businesses. It must make sure that the business machinery of the country shall be preserved from such misuse as would ultimately destroy it.

Conditions confront us which are now determining the country's future. A significant process of evolution is going on within our commercial organization. Two types of corporate managers are struggling for its control. The one (like most business men) bases his success upon increasing the efficiency of his organization; he acquires and holds his business by giving better service or lower prices. The public thus shares the benefits of his efficiency. He builds up our industrial strength.

The other succeeds, not by his own merit, but by crippling the efficiency of competitors; by railway rebates, by unfair competition, by commercial oppression, by public rights monopolized for private gain; not by giving better service, but by unfairly preventing others from giving any service. If this process continues, it will surrender the control of our commercial forces to the commercial pirate, to the injury of the nation and the unfair ruin of individuals.

Through the Bureau of Corporations, the Federal Government has deliberately taken the side of the fair user of our commercial forces. The instrument of the Bureau in its work has been "efficient publicity." It has relied on the moral sense of the American people, and its compelling force when concentrated intelligently on a business wrong. It has reported to the country, clearly and accurately, the operations of great industries. Business facts and their meaning have been set forth in such brief and plain shape as to be available through the press for the average citizen. It has thus evoked that intelligent public opinion that will protect honest business and condemn unfair practices.

It has been pioneer work on a vast subject, but the results have shown what can be done and how to do it. A great awakening has taken place in recent years as to our business methods. The Bureau does not assert that it has done anything more than aid in this process. But it does contend that the principles which it has used are the same ones which have brought about this advance and will continue it. The Bureau has proved by results that its methods are fit for broad application. Under the public condemnation thus made possible by facts plainly stated, great corporate abuses have been abandoned. A sweeping system of railroad rate discriminations has been voluntarily canceled by the railroads involved, and numerous forms of commercial oppression have diminished. Corporate man

agers themselves are frankly advocating more open accounting. One by one the great silent corporations are seeking public confidence by adopting a new policy of publicity.

The situation is thus ready for a complete system where (1) all important interstate-commerce corporations shall regularly make reports to a federal agency; where (2) that agency shall have the further right to verify and extend the facts presented; where (3) business transactions of public interest shall be made public, safeguarding at the same time all proper business secrets; where (4) there will be a permanent meeting ground for cooperation and adjustment between the Government and business interests; and (5) whereby those corporations that deal fairly and openly shall correspondingly acquire public confidence and support.

The exact form of this system is of little importance. The information must be had for the primary purposes of the Government and the citizen. Cooperation also must be had; publicity should as far as possible be voluntary. Corporate managers are recognizing the value of government publicity. To profit by this new spirit, the system of supervision must provide for cooperation. Prosecution is indeed necessary to destroy unfair methods, but it should be reserved as the last resort rather than used as the normal instrument.

The Bureau has proved the practical value of cooperation. In 1908 it pointed out certain defects in the methods of the New York and New Orleans cotton exchanges. Each exchange at once offered to confer with the Commissioner. As a result of such conference, the New Orleans exchange adopted, by a practically unanimous vote, the entire recommendations of the Bureau. This far-reaching improvement, affecting beneficially the various interests in that great staple, was secured simply by publicity and voluntary cooperation.

In short, our great interstate industries must come under permanent national supervision. The Bureau has proved that this can be secured in a rational and effective way. A system of practical publicity, with cooperation, will obtain that requisite for all wise measures, reliable information. It will involve no drastic action. It will, indeed, forestall such action. It will bring together the Government and the corporate manager in conference and cooperation, which alone can serve to adjust continuously the complex and changing relationship between our business forces and the public welfare. It will direct against business evils the overwhelming force of public opinion. It will be backed by, and make effective, penal law where prosecution is necessary. Such publicity will broadly prevent wrong beforehand instead of punishing isolated cases afterwards. It will remove unjust prejudice; it will improve the standing of our corporate securities, both at home and abroad; it will tend toward

more open and more uniform corporate accounting. Finally, it will help to give our business machinery that foundation of fairness and openness and public confidence which it must have if it is to be a permanent factor in our national advance.

The total appropriations of the Bureau for the fiscal year ended June 30, 1909, were $247,720. The number of employees on that date was 111.

On December 14, 1908, at the request of the chairman of the Committee on Ways and Means of the House of Representatives, and under the instruction of the President, the Bureau furnished that committee, in connection with its pending hearings on the proposed tariff bill, with a statement as to the costs, prices, and profits connected with the production of standard rails for the years 1902 to 1906, inclusive. On December 17, 1908, the Bureau, in response to a similar request, furnished to the chairman of the said committee a statement as to the costs and profits in connection with the production of steel billets, both Bessemer and open hearth basic. The information in both of these statements was part of the data secured by the Bureau in the course of its investigation of the iron and steel industry, and, while brief in form, was unique in its accuracy and scope. The data as to rails covered companies producing more than 93 per cent of all the rails manufactured in the United States during the period covered. The information as to billets covered practically the entire Bessemer ingot production of the country, and more than 75 per cent of the open hearth production, for the period covered. The detailed facts upon which the statements were based were taken directly from the books of the companies producing the rails and the steel.

On February 25, 1909, the Bureau published Part I of its Report on the Tobacco Industry. This part dealt with the position of the "Tobacco Combination" in the industry, and resulted from a thorough examination of the organization and development of the American Tobacco Company and its subsidiary concerns. It also included certain independent tobacco corporations. The American Tobacco Company gave the Bureau practically free access to all its very extensive and voluminous records, so that the Bureau was able to present an unusually complete and satisfactory history of the organization of one of the great interstate corporations of the country. Additional parts are now in course of preparation.

On May 17, 1909, the Bureau published Part I of its Report on the Taxation of Corporations. This concerned the system of taxing manufacturing, mercantile, transportation, and transmission corporations in the six New England States. The uniform presentation of these

systems allows of comparision, and the purpose of the report was to make the general principles and practices of taxation in these States available in concise and untechnical shape for the average reader. Financial results of each system for the latest fiscal year were given. In each case the principal state officials were consulted at length as to methods and practical enforcement. No taxation system can be properly understood from a mere examination of statutes, or without adding thereto a knowledge of the method and practical results of its enforcement. Similar reports as to other sections of the country are in course of preparation. The subject is of such great current importance, and involves such remarkable differences in theory and practice, that it is believed that such presentation will have very considerable value.

On June 4, 1909, the Bureau prepared for the President a report on the prices of tobacco and operations of corporations and others dealing therein, in response to a Senate resolution adopted May 14, 1909. The President transmitted the same to the Senate, where it was largely consulted in connection with certain proposed changes in the internal-revenue tax on tobacco products.

On June 30, 1909, the Bureau had on hand as current work investigations into the lumber and steel industries, the International Harvester Company, the concentration of water-power ownership, and transportation by water in the United States; and was also continuing its investigations into the tobacco industry, the operations of cotton exchanges, and state systems of corporate taxation.

It is one of the fundamental purposes of the Bureau to make available for the average citizen, through the daily press, the information thus collected as to great interstate businesses. Accordingly, each of its published reports, many of which were several hundred pages in length, has been accompanied with a summary, usually from 20 to 50 pages long, and again with a still more compact digest in the shape of a letter of submittal to the President, usually from 5 to 8 pages. This letter of submittal states very briefly the important facts and conclusions as to permanent and significant conditions and tendencies in the industry under investigation, and has been the real medium of general publicity. It has been especially framed in each case with a view to the needs of the press, and as a rule these letters have been published by the newspapers over the whole country in full.

We term such work "efficient publicity." It obviously requires an organization especially adapted thereto. Under the immediate supervision of the Commissioner, each investigation is usually in charge of one man, who, by reason of his high economic training, technical knowledge, business experience, and executive ability, is

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