Objectivity and Accountability: A One-Way Street

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.

The title for these remarks indicates that I have a bone to pick — and indeed I do. It may be sticking in your throat as well as mine and, if so, it’s time to stop choking 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 exposé 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, decide whether large numbers of us live and die. They levy taxes in the form of price increases, unrestrained by competition. They manipulate legitimate governments, turning nations into welfare states for corporations. And they are generally responsible 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 muckraking 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 "muckraker" and to be sure we understand 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 society, but only if they know when to stop raking the muck and to look upward to the celestial vision above them, to the crown of worthy endeavor.

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 usefulness 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 throwing 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 accountable.

The Antipreneurs

I also have a new name for the muckraker of the 1970′s. If you accept "entrepreneur" as the generic term for "businessman", perhaps we can refer to these single-minded, persistent and totally myopic critics of businessmen as "antipreneurs." The negative prefix in "antipreneurs" is quite appropriate since those who hammer away at the business community are for the most part a negative lot. They reject, 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 disconcerting of all — they are succeeding today as never before.

In what ways are they succeeding? 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 initiative 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 conduct, that is coming to idolize the reverse-twist, riches-to-rags antihero.

Think I’m exaggerating? Then consider for a moment a few statistics.

In 1966, Social Research, Incorporated, conducted a study on public 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 fraction, but not nearly so sizeable as it was to become. Five years later, in 1971, the same organization asked the same question and this time the "yes" vote was forty-six per cent. In other words, nearly half of all Americans 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 evidence that "the public will no longer rise to the defense of business 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 pattern. Four years ago, 55 per cent of all Americans questioned by Opinion Research felt that new laws were needed to protect the consumer from unscrupulous businessmen. Two years later, a follow-up poll found that 68 per cent — or more than two-thirds — of the nation favored additional consumer protection laws. The increase in just two years was substantial — 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 comprehensive rules disassociating all phases of production and distribution?

The recent suggestion calling for the Federal chartering of all corporations with the government empowered to control not only hiring and firing but also the establishment of production standards and marketing procedures is no longer deemed extreme by its proponents.

What makes this pell-mell rush toward government control of industry all the more tragic is the fact that its public support stems from the widespread acceptance of slanted investigations, blatant falsehoods and political pre-judgments.

But I don’t have to give you second-hand reports on the activities of the antipreneurs. Let me provide you with some personal, firsthand experiences.

The Energy Gap

Perhaps I should start by providing some background information. 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 point of an unprecedented message by President Nixon to Congress last June and also of a report issued several months ago by a special committee of the National Petroleum Council, an industry board established under government guide lines to help advise 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 specialists, government officials, and by teams of scientists and technologists.

The American Mining Congress accurately summarized the conclusions reached in the NPC Report:

1. The current natural gas shortage will increase in severity.

2. We will become increasingly dependent on imports of foreign crude oil from the eastern hemisphere.

3. The energy industries will find it difficult to raise the estimated $374 billion in capital by 1985 to "provide for our burgeoning energy 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 natural resources, there is no shortage of fuel in this country. They are finding resources, he assured everyone, 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 industry 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 demonstrate we don’t.

Bias Also Showing in Halls of Congress

But it is not the consumer lobbyists 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 this situation the 1971 report of the House Subcommittee on Special Small Business Problems.

The transcript of the Subcommittee Hearings and its final report reflect the mounting and highly biased attack upon the association 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 unsubstantiated 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 research is being stifled by the oil companies.

All the factual evidence submitted to the subcommittee showed that the oil companies entering the coal industry have accelerated and expanded research efforts and projects related to synthetic conversion of coal and new and safer methods of mining. There is no factual evidence to the contrary, yet the report recommends a reassessment of research and development 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 conflicts exist is nothing more than gratuitous fiction.

Who’s Dominating Whom?

The report repeatedly refers to the domination of the coal industry 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 Humble Oil combined own less than 2 per cent jointly of this nation’s recoverable 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. "Domination" by oil companies is, again, fiction.

Finally, the report does not set forth any of the advantages —increased production, accelerated capital investments, expanded research — which have resulted from participation by natural resource companies in the coal industry.

Since the natural resource industries appear unable to obtain fair treatment from self-styled consumer protection groups, and from self-dealing politicos, it has but the executive branch of government or regulatory 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 responding to an inquiry from the Federal Trade Commission regarding the FTC’s desire to review Continental’s acquisitions of Consolidation Coal Company. This request was made notwithstanding 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 Commission chose to reevaluate 1966 determinations by the Department of Justice did not concern 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 appearing before the House Special Subcommittee on Small Business Problems 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 anti-trust actions against oil companies 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 previously approved transaction, a high official representing the prospective prosecutor, judge and jury —the FTC—pronounces judgment. Is this objectivity? Is this impartiality? 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 mevidence which they relied on to prejudge a matter of such importance to the future of the energy industries and this Nation? Not from the energy industries! Not from Continental’s submission.

The answer may be found in the record of the House Subcommittee Hearings. On Page 61 of the transcript of the Hearings, Worth Rowley, an attorney representing the American Public Power Association, an association dedicated to fragmenting the coal industry, and Mr. Rayburn, Counsel to the Subcommittee, engaged in the following exchange:

Mr. Rayburn to Mr. Rowley: What did your association have to do to get the Justice Department to transfer the Consolidation Coal/Continental Oil case to the Federal Trade Commission? You make that statement on page 6.

Mr. Rowley: When we met with Assistant Attorney General McLaren in March, just to start the proceedings, I asked him if he would release it — release the matter to the Commission 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 association do to aid the Federal Trade Commission’s investigation in this energy field? What do you envisage?

Mr. Rowley: Well, one thing we did, of course, was to turn over what information, economic insights, and legal insights we had to them, and made available certain of our members 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 exerted a powerful and effective influence on the supposedly impartial activities of the Federal Trade Commission. And it is not surprising to also note that the previously mentioned best seller, America, Inc., while devoting a great deal of attention to corporate influence, mentions not one word about the vast — wholly unregulated — power of the liberally oriented pressure groups which constantly seek to influence government.

Help From the Media?

Well, now if not consumer protection 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 majority 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 — totally false.

As for the suggestion that "high and steady profits" have attracted oil companies into the coal business, according to information from the National Coal Association, 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 informed reporting — what is left? I think only the industry — suspect as it may be. But even this source is limited, and that is why I charge that objectivity and accountability 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 major 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 implications 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 interests 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 oriented media headlines will quote your statements out of context.

Can anything be done to improve the restrained posture of the business community vis-a-vis wholly unrestrained critics?

I’m a perennial optimist and believe 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 diffidence 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 activities to provide truth in a massive dose. Truth is the only antidote 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 opposition.

So let me close with these few thoughts.

The natural resource industries of this nation are faced today with challenges which, if not resolved, 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 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 incapable 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 misleading 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 prominent member of Congress which bore no relationship to uncontroverted facts. I was astounded that not one of many outstanding business leaders present would risk an open fight. When top level management is so afraid to stand on a platform of truth, how can you expect 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 and 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 Corporation, 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 executives 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 expressed at the typewriter level —the reporter. Industry must open up its doors, its knowledge, its experience and facts to this young group of Americans who are gathering and reporting news. Most of them are products of a very liberally oriented undergraduate school — an area deserving much greater time and attention — and are totally inexperienced in business affairs. Until they know more about the business community, why shouldn’t they accept the preachings 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 operations and the extent of our efforts to eliminate pollution he commented, "I would never have believed it."

Coordinate the Efforts of Business and Government

Fourth: We could spend hours talking about the social responsibility 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 efforts 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 defensive 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 community itself can take. But perhaps the biggest turnaround in this area of objectivity and accountability would be achieved if the regulatory agencies and the Congressional committees would require our critics to operate under the same ground rules and laws of disclosure and accuracy to which we in industry are subjected. Until that goal is miraculously achieved, we must continue to make those critics accountable to the final regulatory body: public opinion. And this can only be accomplished by continuous vigilance on our part and a determination to participate rather than merely to decry.

 

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Value

"The value of anything is not what you paid for it, not what it cost to produce, but what you can get for it at an auction."

WILLIAM LYON PHELPS