Freeman

ARTICLE

"Famous Last Words"

MARCH 01, 1958 by WALTER J. BLUM

Mr. Blum is Professor of Law at the University of Chicago. He is co-author with Harry Kalven, Jr. of  The Uneasy Case for Progressive Taxation, University of Chicago Press, 1953.

The turn in events leads me to speak a few words about Con­solidated Supercorporation before stepping down from the Chair­manship of its Board of Directors, after twenty years at the helm.

I, for one, am extremely proud of the role which our company has played on the American scene in the past two decades. The people regard our company as a model. From being a self-centered or­ganization viewed with suspicion, it has won the reputation of being an almost sacred trust operated for public benefit.

Let me trace briefly with you the important milestones on this road we have traveled.

My very first act upon assuming the Chairmanship in 1937 was to insist that it was wrong to allow the bitter company-wide strike to continue. By refusing to meet the terms of the union which was or­ganizing our plants, we were de­priving the public of our products. As I then said, it was as much a wrong to block the creation of our goods as to plow under little pigs. Both deny the consumer his right­ful freedom of choice.

Two years later, in 1939, we pioneered a new relationship be­tween industry and advertising. We were the first company to sponsor a radio program designed not to gain customers, but to fur­nish the country with enlighten­ment which otherwise would be monopolized by a privileged few. I am sure all of you then on the Board vividly recall, as the high-water mark, our series of twenty-four lectures, each by a different outstanding philosopher. What must be hard to believe today is that only once during each hour program were listeners interrup­ted in their thoughts to be in­formed of the sponsor’s identity.

As the American economy was responding to the beginning of World War II, our company cap­tured a new "first." Without any hesitation, we announced a policy of full compliance with the gov­ernment’s efforts to hold down prices through voluntary means. Not once did we refuse to coop­erate with the maximum prices suggested by the Price Adminis­trator. Steadfastly we held the line, even when not a single other firm in the industry was willing to make that sacrifice for the good of the country.

Early in the war an excess profits tax was enacted on the theory that war resulted in ab­normally large profits due to the situation at hand and not to the efficiency of enterprises. Upon pas­sage of this tax, your company re­sponded in characteristic fashion. We immediately proclaimed our position that since excess profits are unfair, we would price our goods so as to avoid having any such profits. Thus we were the only large government supplier whose contracts were never once renegotiated throughout the whole of the war. Just think how much wrangling would have been avoided had our policy been cop­ied by all contractors!

When the war ended, we were in danger of losing our enviable reputation because more and more corporations were beginning to re­tain public relations counselors. You must admit that we met this challenge forcefully. No single ac­tion during the postwar period was more dramatic than our an­nouncement, in 1946, that each year 5 per cent of the company’s income would be donated to local community funds throughout the country. Does it seem possible to you now that some stranger nearly succeeded in undermining this noble program by suing us? What hurt me most was that the nervy fellow held only a measly 25 shares out of our 16,000,000 which were then outstanding. Even to this day it aggravates me to think that this selfish individual succeeded in forcing us to reduce our annual contribution from 5 per cent of gross income to 5 per cent of net income.

During the slight recession of 1948, we were much tempted to close several of our obsolete plants and move the operations to other areas more favorably situated as to labor and transportation costs. Indeed, the leading management firm in the country strongly ad­vised this. As usual, we acted in the best traditions of democracy. We held innumerable meetings with the townspeople and our em­ployees who would be adversely affected, and learned of the bur­dens that would be imposed upon them. In the end we were per­suaded to stand pat. My, there was great rejoicing around the old plants; and who among us here will not say that these displays were heartwarming? I only wish that the celebrations had been wit­nessed by the cranks who com­plained about our decision — espe­cially those merchants, landown­ers, and workers who thought they might personally profit from the relocation.

Two years later, in 1950, we car­ried this policy to its logical con­clusion. Learning that several marginal firms in the industry were preparing to liquidate be­cause they were operating at a loss, our company, to avert that tragedy, acquired the firms and continued to operate them as sub­sidiaries. Thus did we do our duty to prevent society from suffering a waste of its capital resources.

I must not overlook the role our company played in the Point Four program by which the United States undertook to provide tech­nical assistance to underdeveloped areas. The response to the govern­ment’s appeals for expert techni­cians was discouraging. Most of the competent people were already under contract and their employ­ers were reluctant to lose their services. In an effort to break the bottleneck, we offered to lend any of our trained personnel for for­eign duty and to continue paying half their regular salaries. There is no need for me to remark on the thrill we received when the Presi­dent of the United States singled us out for special commendation at his press conference. But I will emphasize that our plan was successful: many of our best engi­neers did go to the four corners of the earth, and some of them have yet to return.

Another bit of farsightedness on our part likewise pleased the administration. Ever since the mid-thirties, some economic ad­visors have concluded that our economy would be more stable if the acquisition of capital goods were less cyclical. Our contribu­tion to making this a reality was the novel long-range capital expan­sion program we inaugurated in 1954, under the title of "Automa­tion of Expansion." Every econo­mist has commented on our pledge to increase our capital outlays by 61/4 per cent a year regardless of economic conditions. While natur­ally I relished the publicity that followed, I took most pleasure in working with that smart little economist — oh, what is his name? — who conclusively showed us —on his slide rule, mind you — that 6 per cent per annum would be too small and 61/2 per cent too large an increase. I know you will excuse me if I digress just to wonder what’s become of him since then.

I could go on at length reminisc­ing about the forward-looking achievements of Consolidated Su­percorporation, but I shall limit myself to selecting only one more — our latest dedication to living the good corporate life. Come now, confess, didn’t all of you really enjoy returning to the University this summer for a refresher course in the liberal arts? Speaking for myself, I got a real kick out of reading Plutarch’s Lives! But even if not all of you were com­pletely comfortable in the class­room, surely you will agree that our executive retraining program will in time do something to Amer­ican business. Who knows, it might even improve the moral force that our country can bring to bear on other members of the United Na­tions.

No wonder, then, that Consoli­dated Supercorporation often is referred to in the press as the American answer to the Welfare State — the welfare corporation. And the people wholeheartedly have been on our side. Their ap­preciation, as shown by the chart over on the wall, has resulted in a tenfold increase in our dollar vol­ume during my two decades as Chairman of the Board.

I would close my remarks here were it not for the depressing news, conveyed to us earlier in this meeting, that some creditors have today filed a petition to reorganize the company under the Bank­ruptcy Act. There is no hiding the fact that this is an event for which I was little prepared. The company certainly deserves better. But far more important than its immedi­ate fate is the need to make sure that no wrong conclusions are drawn from our experience. It is to this end that I have spoken.

So I come to my last words as Chairman. Our policies were sound. If our fortunes have suf­fered, it is not because of our good works and ideals but because the fates were unkind. The long and short of the matter is simply this: Even though our competitors failed to live up to the standards of corporate good citizenship which we set, they were luckier. Somehow their costs just were lower than ours!

ASSOCIATED ISSUE

March 1958

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