Objectivity and Accountability; C. H. Hardesty, Jr.

Ob- -~-~ .. ~ and Accoun THE TITLE for these remarks in dicates that I have a bone to pick - and indeed I do. It may be stick ing in your throat as well as mine and, if so, it's time to stop chok ing and do something. As background, permit me to quote the first paragraph of the publisher's summary to a recent best selling book: This well documented expose. reveals the incorporated rulers of the United States and, indeed, much of the world. It shows them to be private governments which, as effectively as legitimate public governments, de cide whether large numbers of us live and die. They levy taxes in the From remarks by Mr. Hardesty, senior vice president of Continental Oil Company, before the annual meeting of the American Mining Congress in Washington, D. C., January 17, 1972. c. HOWARD HARDESTY, JR. form of price increases, unrestrained by competition. They manipulate legitimate governments, turning na tions into welfare states for corpora tions. And they are generally respon sible only to themselves.

This book, America, Inc., was on the best seller list for 17 weeks and Time magazine in its review described it: "in the best muck raking tradition it is thoroughly documented to present a look at the seamy side of business." As it happens, in a recent speech I used the term "muck raker" and to be sure we under stand what is meant by it, let me quote from the .term's political originator, Theodore Roosevelt: The men with muckrakes are often indispensable to the well-being of so195 196 THE FREEMAN April ciety, but only if they know when to stop raking the muck and to look up ward to the celestial vision above them, to the crown of worthy en deavor. There are beautiful things above and around them and. if they gradually grow to feel that the whole world is nothing but muck their power of use fulness is gone. It would be naive to suggest that inaccurate criticism is unique to the last half of the twentieth century. It is as old as speech, but perhaps T. H. Huxley put it best when he said: "There are men to whom the satisfaction. of throw ing down a triumphant fallacy is as great as that which attends the discovery of a new truth."

Lack of objectivity and non accountability seem these days to be the fashion. Too many people are "throwing down a triumphant fallacy" and others are treating it as "a new truth." To compound the felony, no one is held account able. The Antipreneurs I also have a new name for the muckraker of the 1970's. If you accept "entrepreneur" as the ge neric term for "businessman" , perhaps we can refer to these single-minded, persistent and to tally myopic critics of business men as "antipreneurs." The nega tive prefix in "antipreneurs" is quite appropriate since those who hammer away at the business com munity are for the most part a negati ve lot. They rej ect, and they rebuke, and they reproach, and they frequently view with alarm, but hardly ever do they come up with .anything constructive. The enemies of private industry are active today as never before, they are influential today as never before and - most discon certing of all - they are succeed ing today as never before.

In what ways are they succeed ing ? Well, for one thing, they are changing some basic attitudes in this country. They are converting the United States of America from a nation that once respected initia tive and economic achievement, that honored the rags-to-riches hero, to a nation that imputes to its businessmen the most venal motives and most despicable con duct, that is coming to idolize the reverse-twist, riches-to-rags anti hero. Think I'm exaggerating? Then consider for a moment a few statistics. In 1966, Social Research, Incor porated, conducted a study on pub lic attitudes toward businessmen. Twenty-eight per cent of all Americans polled agreed to the statement that "big business is dangerous to our way of life." Twenty-eight per cent. A sizeable 1972 OBJECTIVITY AND ACCOUNTABILITY 197 fraction, but not nearly so size able as it was to become. Five years later, in 1971, the same or ganization asked the same ques tion and this time the "yes" vote was forty-six per cent. In other words, nearly half of all Ameri cans now regard you, the nation's businessmen, as a threat to their existence.

Dr. Burleigh Gardner, President of Social Research, interpreted the results of his survey as evi dence that "the public· will no longer rise to the defense of busi ness against extremists or protest groups." And I would say that this was a reasonable assumption. Another set of studies, this one conducted by Opinion Research Corporation, showed a similar pat tern. Four years ago, 55 per cent of all Atnericans questioned by Opinion Research felt that new laws were needed to protect the consumer from unscrupulous busi nessmen. Two years later, a fol low-up poll found that 68 per cent - or more than .two-thirds - of the nation favored additional con sumer protection laws. The in crease in just two years was sub stantial - and significant. Regardless of how much has been done to transfer control of American industry from private hands to government hands, the antipreneurs cry out for more.

Could it be that our antipreneurs will be satisfied with nothing less than de. facto nationalization .. of industry through a system of com prehensive rules disassociating all phases of production and distribu tion? The recent suggestion calling for the Federal chartering of all corporations with the government empowered to control not only hir ing and firing but also the estab lishment of production standards and marketing procedures is no longer deemed extreme by its pro ponents. What makes this pelt·mell rush toward government control of in dustry all the more tragic is the fact that its public support stems from the widespread acceptance of slanted investigations, blatant falsehoods and political prejudg ments. But I don't have to give you sec ond-hand reports on the activities of the antipreneurs. Let me pro vide you with some personal, first hand experiences. The Energy Gap Perhaps I should start by pro viding some background informa tion. The United States today faces an energy gap. This is the growing disparity between the amount of energy-source materials produced in our country and the total consumed.

This energy gap was the focal 198 THE FREEMAN April point of an unprecedented mes sage by President Nixon to Con gress last June and also of a re port issued several months ago by a special committee of the Na tional Petroleum Council, an in dustry board established under government guide lines to help ad vise the Secretary of the Interior. The report was the result of thousands of hours of research by 200 experts in their fields, the best qualified staff people, finance spe cialists, government officials, and by teams of scientists and tech nologists. The American Mining Congress accurately summarized the conclu sions reached in the NPC Report: 1. The current natural gas shortage will increase in severity. 2. We will become increasingly de pendent on imports of foreign crude oil from the eastern hemi sphere. 3. The energy industries will find it difficult to raise the estimated $374 billion in capital by 1985 to "provide for our burgeoning en ergy requirements."

On October 28th in Houston, Ralph Nader breezily dismissed any such situation and described the energy gap as "a promotion" of the fuel companies' advertising departments. Actually, said this self-designated authority on natu ral resources, there is no shortage of fuel in this country. They are finding resources, he assured ev eryone, faster than the public can consume them. Mr. Nader's headline news that there is no shortage of fuel is at complete odds with the unanimous findings of government and indus try and can only serve to confuse the public. Do we or don't we have a shortage? I rely on the experts who say we do, and I charge that incomplete and inaccurate data were used as a base to demon strate we don't. Bias Also Showing in Halls 01 Congress But it is not the consumer lobby ists alone whose bias is showing. The Halls of Congress are no less overrun today with antipreneurs - whose zeal, if nothing else can only be admired. But I despair over their lack of accuracy, their lack of objectivity and their lack of accountability.

I cite as an irrefutable example of thi~ situation the 1971 report of the House Subcommittee on Special Small Business Problems. The transcript of the Subcom mittee Hearings and its final re port reflect the mounting and highly biased attack upon the as sociation of oil companies with coal companies. That this bias is not based on fact is apparent from a reading of the transcript and report in which wholly unsubstan..; 1972 OBJECTIVITY AND ACCOUNTABILITY 199 tiated innuendoes of monopoly and collusion abound. A good example· of .the totally unsupported charges of unlawful conduct found in the report ·is the allegation that coal-related re search is being stifled by the oil companies. All the· factual evidence submit ted to the subcommittee showed that the oil companies entering the coal industry have accelerated and expanded research· efforts and projects related to synthetic con version of coal and new and safer methods of mining. There is no factual evidence to the contrary, yet the report recommends a re assessment of research and de velopment of the liquefaction and gasification of coal in order to eliminate conflicting priorities in the attainment of economically feasible synthetic fuel processes.

The suggestion that priority con flicts exist is nothing more than gratuitous fiction. Who's Dominating Whom? The report repeatedly refers to the domination of the coal indus try by oil companies, yet the facts show that all oil-associated coal companies together produce only about 20 per cent of the nation's coal and that Continental and Hum ble Oil combined own less than 2 per cent jointly of this nation's re coverable reserves of coal. Almost 65 per cent of this country's more economic deposits of coal are neither presently owned nor under lease to any coal company. "Domi nation" by oil companies is, again, fiction. Finally, the report does not set forth any of the advantages increased production, accelerated capital investments, expanded re search - which have resulted from participation by natural resource companies in the coal industry. Since the natural resource in dustries appear unable to obtain fair treatment from self-styled consumer protection groups, and from self-dealing politicos, it has but the executive branch of gov ernment or regula tory agencies to look to for objective evaluation of the described groundless charges.

Can help be expected? I am afraid not - and let me tell you why. Recently, Continental announced that it was voluntarily respond ing to an inquiry from the Fed eral Trade Commission regarding the FTC's desire to review Con tinental's acquisitions of Consoli dation Coal Company. This request was made notwithsanding the fact that prior to the association of these two companies in 1966, the entire transaction was reviewed in depth by the Justice Department, and they indicated no intention to contest it.. However, the fact that at this late date the Federal Trade 200 THE FREEMAN April Commission chose to reevaluate 1966 determinations by the De partment of Justice did not con cern Continental nearly as much as certain recent public statements voiced by several members of the Commission's staff. Note these dates: Due to the mass of documentation requested, Conoco did· not file the requested information with the FTC until January 7, 1972. Yet, on October 28, 1971, in the course of appear ing before the House Special Sub'committee on Small Business Prob lems in Nashville, Tennessee - Mr.

Lawrence G. Meyer, Director of Policy Planning for the FTC stated to the press assembled: "The Federal Trade Commission will file the first of three or four antitrust actions against oil com panies invading the coal industry within six months." It's shocking to learn that three months in advance of voluntary filing relating to a review of a pre viously approved transaction, a high official representing the pros pective prosecutor, judge and jury -the FTC-pronounces judgment. Is this objectivity? Is this im partiality? Or is this prejudgment and public pandering in the worst sense? From Whence the Evidence? One might inquire: Where did Mr. Meyer and his staff obtain the evidence which they relied on to prejudge a matter of such im portance to the future of the en ergy industries and this Nation? Not from the ;~nergy industries! Not from Continental',s submis sion. The answer may be found in the record of the House Subcommit tee Hearings. On Page 61 of the transcript of the Hearings, Worth Rowley, an attorney representing the American Public Power Asso ciation, an association dedicated to fragmenting the coal industry, and Mr. Rayburn, Counsel to the Subcommittee, engaged in the fol lowing exchange: Mr. Rayburn to Mr. Rowley: What did your association have to do to get theJ ustice Department to trans fer the Consolidation Coal/Contin ental Oil case to the Federal Trade Commission? You make that state ment on page 6.

Mr. Rowley: When we met with Assistant Attorney General McLaren in March, just to start the proceed ings, I asked him if he would release it - release the matter to the Com mission for. investigation, and he said he would. We did not have to go to very great lengths. We just had to assemble our committee members and pop the question. Then there was a delay of about 6 weeks and a little more pressure from us, and that which had been promised came to pass. Mr. Rayburn: What can your as1972 OBJECTIVITY AND ACCOUNTABILITY 201 sociation do to aid the Federal Trade Commission's investigation in this energy field? What do you envisage? Mr. Rowley: Well, one thing we did, ofcollrse, was to turn over what infor'mation,economic insights, and legal, insights we Wad to them, and made available certain of our mem bers for purposes of consultation. From then on, the initiative rests with the Commission. Anything they want which we can produce we are producing.

Doesn't this exchange tell you something about the source of Mr. Meyer's evidence? It is clear from the record that a special interest group has ex erted 'a powerful and effective in fluence on the supposedly impar tial activities, of the Federal'Trade Commission. And it is not surpris ing to also note that the previously mentioned best seller, A merica, Inc., while devoting a great deal of attention to corporate influence, mentions not one word about the vast - wholly unregula:ted - power of the liberally oriented pressure groups which constantly seek to influence government. Help From the Media? Well, now if not consumer pro tection groups, the legislative branch or the regulatory agencies - who can we look to to present the real facts? The media? I think not; omissions as well as errors provide a yeasty breeding ground for compounded error among some of the media representatives who cite unsupported allegations as truths.

For example, in a recent issue of The New Republic an article contains this serious charge: "High and steady ,profits have lured' the oil companies into the field and they now control a ma jority of the 50 largest coal firms." As for the fact of controlling a majority of the 50 largest coal firms, it is nothing better than a figure plucked out of the air - to tally false. As for the suggestion that "high and steady profits" have attracted oil companies into the coal busi ness, according to information from the National Coal Associa tion, the net income of all coal companies that had an income, less the deficit of those showing a loss, was $105 million in 1965. In 1966, it was $96 million. In 1969, it was $14 million. Is that a case of "high and steady profits?" No! Steady decline? Yes! Corporate Hurdles If I must also exclude the media as a source of' unbiased and in formed reporting - what is left? I think only the industry - suspect as it maybe. But even this source is limited, and that is why I charge that objectivity and ac202 THE FREEMAN April countability is a one-way street.

Consider the hurdles a corporate executive must scramble over when he chooses - all too infrequently - to address himself to a maj or public issue! The economics division reviews the text to make sure that all the facts are correct. The legal division examines every word to make sure that all rules and regulations of the SEC, FTC, Justice Department and a multitude of other government agencies are complied. with. The public relations function reads every word for hidden im plications or possible backlash, and makes sure that it accurately represents the situation and is consistent with company policy. The finance group reviews the text to make sure that the inter ests of bankers and analysts are considered. And finally, the pulse of the Chief Executive Officer must be taken to protect your job in the probability that non-business ori ented media headlines will quote your statements out of context.

Can anything be done to im prove the restrained posture of the business community vis-a-vis wholly unrestrained critics? I'm a perennial optimist and be lieve that over the long haul we can reverse the current trend. Walter Lippmann recently summed it up this way: "I've never known a time when people had so little confidence in the future. They're afraid they're not sure they are equal to it and there is a great dif~ fidence about the future. But I don't think that is irremediable. I think even with all our size and complications and so on, if there comes a group of leaders - and there may well be - and they can strike the right note, the country will respond." Changing the Trend, a Matter of Leadership Personally, I believe he is right and that people will respond if leaders - and I suggest the leaders of enterprise - intensify their ac tivities to provide truth in a mas sive dose. Truth is the only anti dote to the exaggerations of 'the antipreneur. If you are to conclude pessimistically that the job can't be done, then let's fold up our tents, go home and join the op position.

So let me close with these few thoughts. The natural resource industries of this nation are faced today with challenges which, if not re solved, endanger their continued existence. These challenges have the potential of destroying the economic ability of free enterprise to respond to society's needs. I believe that these predictions are 1972 OBJECTIVITY AND ACCOUNTABILITY 203 objective and I am willing to be held· accountable for their ultimate accuracy. My belief arises not from a fear that the business community is in capable of meeting our nation's demands for energy and other basic natural resources. Rather, it stems from a recognition that our critics, if not questioned and held accountable for false or. mislead ing criticism, will divert business, government and the public from the pursuit of a common purpose. Now what can we do about this state of affairs? Come Out Fighting First: Come out fighting for a cause you believe to be just and fair. Recently, I attended a trade association meeting to consider the response to charges of a promi nent member of Congress which bore no relationship to uncontro verted facts. I was astounded that not one of many outstanding busi ness leaders present would risk an open fight. When top level manage ment is so afraid to stand on a platform of truth, how can you ex pect one of your juniors to risk a black eye?

This whole philosophy of low profile must be discarded and the business community must stand up, fight back ltnd lead. Conditions won't turn around overnight. There will be some stitches and sutures applied, but your critic will begin to think twice before he plays loosely with the facts once he gets nailed to the cross. Second: Mr. Roalman, Vice President of CNA Financial Cor poration, in a recent article on "Why Business Is Losing Its Case" said that, "management needs to go more often into the arena. Too often, top management confines itself to talking to its boards of directors, its peers and trade-related people. Its efforts miss, grossly, most Congressmen, legitimate consumerist-critics, young people and the bulk of the educational community." Of course it's important to communicate with our boards and industry people, but such talk alone will not wrestle with and resolve criticism being leveled in classrooms, on the streets and in the press. That's where the action is and we can no longer ignore it.

See the Reporter Third: I'll never cease to be amazed why most business execu tives feel that a friendly luncheon with the publisher of a newspaper or president of a T. V. network will solve our problems. A story is created and subjective feelings ex pressed at the typewriter level the reporter. Industry must open up its doors, its knowledge, its ex perience and facts to this young 204 THE FREEMAN April group of Americans who are gath ering and reporting news. Most of them are products of a very liber ally oriented undergraduate school - an area deserving much greater time and attention - and are to tally inexperienced in business af fairs. Until they know more about the business community, why shouldn't they accept the preach ings of America, Inc.? It's our job to give them a true insight into what goes on and the good things the muckraker ignores. I consider characteristic the observation of a fairly radical conservationist we hired. After observing our opera tions and the extent of our efforts to eliminate pollution he com mented, "I would never have be lieved it."

Coordinate the Efforts 01 Business and Government Fourth : We could spend hours talking about the social responsi bility of business as it faces the future. One fact is clear - the world is changing and society has the right to expect us to lead and not follow.. We must provide the catalytic tool to coordinate the ef forts of business and government as we approach tomorrow. We should not wait until a muckraker, a Federal· agency or a committee of Congress prods us into defen sive action. We have the ability to plan, organize and coordinate an effective means of goal attainment, whether it be social or economic. At this moment, such an effort has not been given a sufficiently high priority. Those four suggestions .are aimed at actions the business com munity· itself can take. But per haps the biggest turnaround in this area of objectivity and ac countability would be achieved if the regulatory agencies and the Congressional committees would require. our critics to operate un der .the same ground rules and laws of disclosure and accuracy to which we in industry are sub jected. Until that goal is. miracu lously achieved, we must continue to make those critics accountable to the final regulatory body: pub lic opinion. And this can only be accomplished by continuous vigi lance on our part and a d~termina tion to participate rather than merely to decry. • IDEAS ON $ LIBERTY Value "THE VALUE of anything is not what you paid for it, not what it cost to produce, but what you can get for itat an auction."

WILLIAM LYON PHELPS The Nature of DAVID OSTERFELD IN REFLECTING upon the intensity of the sentiment and the methods utilized in contemporary antiwar protests, it seems manifest that the preference is always for peace; that nobody wants war. So, one must ask why, if no one wants war, do wars continue to occur? Perhaps wars result, not from the direct intentions of· "war mongering capitalists" or any oth er group for that matter, but as Edmund Opitz observed, they are the "unexpected by-product," the inevitable culmination, of particu lar political or economic policies not intended to be aggressive and, in fact, even humanitarianly moti vated. What one must, therefore, attempt to discern is the generic nature of these particular policies whose underlying elements propel Mr.Osterfeld is a political science n~ajor, work.,. ing toward a Master's degree in International Relations at the University of Cincinnati.