cluded that some institutions-particularly banks have personnel and business relationships with portfolio companies which may tend to reinforce any power conferred as a result of stock holdings, may create potential conflicts of interest and may lead to misuse of inside information. The SEC found a strong statistical correlation between bank stockholdings and personnel and business relationships.

As we review reporting requirements of various Federal agencies we will look at the questions which the agencies ask-or do not ask-and the answers they receive regarding direct and indirect interlocks, and financial dealings between regulated companies and the institutions with which they have a stock or interlock relationship.

One of our witnesses next week will be the Chairman of the Civil Aeronautics Board, which recently recognized the need for gathering more information regarding these several interrelated control mechaLi-ms, and instituted an appropriate investigation.

CONCENTRATION OF ECONOMIC POWER

A fourth area of undisclosed ownership on which we seek additional i'lumination is the national extent of concentration of economic power. In setting the rules for limiting control of a company by a large inTestor, Congress and the commissions usually look at a single investor's potential influence within one company, or one industry. The data contained in "Disclosure of Corporate Ownership" show-on the basis of partial, voluntary disclosure and sample studies by the SEC, FCC and Congressional Research Service a degree of over-all concentration beyond that which has been heretofore available to the Congress. The study shows that the same few banks are dominant within a number of competing companies airlines, broadcastnig, pharmaceuticals, electrical equipment, conglomerates, and petroleum.

This partial data, for the years 1969 and 1972, suggests a need for comprehensive and timely collection of information regarding all aspets of corporate concentration so that its ramifications can be condered by Congress on a factual basis.

CORPORATE ANNUAL ELECTIONS

I would note that we begin these hearings in an election season. Many corporate annual elections and meetings of stockholders will be held the next few weeks.

They do not of course receive the kind of surveillance attending the tions to which members of this committee are accustomed. This may be because of the difficulty in creating an aura of suspense regardg an election in which a single slate of officers, selected by insiders, 1 offered, an election in which no provision is made for casting nay votes against the single slate, and the outcome of which decided before the annual meeting begins, by the proxies of a few large institutional

Investors.

But I think it is appropriate to note here that interest in corporate overnment has now extended beyond the participation by a few inividual or a project GM.

More than 60 major corporations will consider, this spring, shareholder resolutions from church, labor, environmental, foundation, and [be interest groups and individuals. In a number of these challenges,

the issue is corporate disclosure. The concept of the Sunshine Law, of which Florida Senators on this committee often speak, is spreading to corporate government.

SHARED OVERSIGHT

I would hope that these hearings will encourage more persons outside and inside of government-Federal, State, and corporate-to participate in the important business of information collection by the Federal Government. Congress has improved the procedures for public participation. The vital oversight function can be broadly shared.

We have one witness this morning, Mr. Norton Simon. Mr. Simon has served on the boards of corporations. He founded the conglomerate which bears his name. He is an industralist and financier who has had some blunt things to say about corporate disclosure and agency collection of information from companies.

Accordingly, Senator Muskie and I have requested that Mr. Simon appear here today and answer questions with respect to this investigation into corporate information and disclosure into which our two subcommittees have launched.

Mr. Simon does not have a prepared statement, but will answer questions from members of the subcommittee.

Senator Muskie, who is chairman of the other subcommittee, Intergovernmental Relations, which is a cosponsor of these hearings, will be here shortly.

Senator Muskie and other members of our subcommittees, of either of our subcommittees, may wish to make opening statements which will be incorporated into the record if they are not here. We will keep the record open so they can appear and make their opening statements at an appropriate time.

We have on the floor of the Senate today, beginning shortly, one of the most important and significant bills to come out of Government Operations, the budget control bill, and it is in the third day of debate and discussion. Senator Muskie and Senator Ervin are floor managers of that bill, and as soon as that bill is called up and made a regular order of business, they will have to leave.

I will open the questions or ask Mr. Turner, as counsel of the committee, to ask questions of Mr. Simon, and as soon as Senator Muskie comes, I will yield to him.

Mr. Simon, we are privileged and honored to have you here this morning. It is a distinct contribution, that we look forward to, that you can make to this committee's inquiry and investigation, and if you have any brief statement to make at this time, you can make it or at least identify your colleagues at the witness table.

STATEMENT OF NORTON SIMON, INDUSTRIALIST AND FINANCIER, ACCOMPANIED BY ALVIN E. TOFFEL, ALAN ROBERT BLOCK, AND THEODORE WEISMAN

Mr. SIMON. I will have a brief statement to make extemporaneously. First, my assistant to my left is Mr. Alan Block, and to my right Mr. Alvin Toffel, and an associate of mine not connected with this at all, Mr. Theodore Weisman.

Senator METCALF. We are privileged to have all of you here.

Mr. SIMON. I come here considering it a privilege to be requested to come. I have never been to a hearing before, that is, personally spoken at a hearing of this kind, and I find it hard to come to you, but the request for this hearing seemed of such importance that I did want to respond because of the nature of it. I feel that this will go ery deeply into our society.

I think a real thorough digging in these areas will-and this may e a very big statement-will do a lot toward pointing out some of the disastrous conditions that we find ourselves in economically at this point in time.

Senator METCALF. Well, Mr. Simon, you will recall that it was as a result of the newspaper stories about the Burlington Northern l your resignation from the board that members of this committee. requested that you appear and talk to us about some of these corporate itters with which we have immediate concern, and we are privleged to have you here today at our invitation to testify about these

matters.

Mr. Turner, counsel for the committee, has a series of questions. He will open at this time, but if Senator Muskie does arrive shortly, I will ask Mr. Turner to yield to him.

Mr. SIMON. I would like to volunteer something additional since wou said that, because I did say this is the first hearing of this kind that I attended, but if all of you will recall, at the drastic time of the stel increases when President Kennedy was so frustrated, I was in Wheeling Steel at that time and I had a considerable conversation with him over the phone as to why I felt what existed, existed, and it thesunto this very matter.

I also had spoken to a couple of economists in the Government here and I have spoken to Secretary Shultz and others about some of my Concerns. Obviously, a request to come to a hearing like this is a privige because after years of being a voice in the wilderness, and I am probably still in the wilderness, but lately a little of the wilderness is

Mr. TURNER. I want to emphasize that this is an investigatory aring. You were requested to come and answer questions from your owledge and direct experiences in the day-to-day operations of teral large corporations such as the Burlington Northern, Wheeling tel. Crucible Steel, and other companies, which we will get into as we go along, so let me start right at it.

In a recent interview in the Washington Post, Mr. Simon, you were oted as saying that working on the board of a major U.S. corporatoon makes you feel "that I am working in a cartel system in one of the feudalistic States."

Now, that is a very interesting statement. What did you mean by tattatement and would you identify the corporation or is it all

trations?

Mr. SIMON. Well, I have had that experience in almost all corporarior most corporations I have gotten into. I don't think all corporatrons work on that basis, but most of the corporations I have gone to or have become associated with have that type of format. I know there are some that do not.

What I meant by it, and probably it wasn't the best metaphor in the world, was that the feeling that I felt was that the monarch sat at the head of the table and the nobles who were their knights in the society could express themselves, but in the final analysis, one does as the monarch says.

Mr. TURNER. Who is the monarch and how does the monarch become the monarch at the table, the boards of directors of these companies? Mr. SIMON. Let me clarify. Maybe that isn't the monarch. Maybe that is the King of Saxony, but he is responsible to the King of all the states that Saxony is under because, truly, it has the feeling that Senator Metcalf states in here about the proxy at a stockholder's meeting where the vote is always 99 to 1 or 98 to 2, and you have modest resistance from stockholders with a few shares, but without significant ownership.

They plug away and have done some good at the stockholders meeting, but I know I have had a few stockholders meetings myself where I have requested that the large stockholders make an appearance, and I have had five or six of them make an appearance, and I had everyone have their turn in asking questions, and I felt that there was a little more participation.

The stockholders meeting had a little more significance.

I have been very disturbed recently by articles that have been proposing doing away with stockholders meetings what is the point of them they are a farce. Maybe they are a farce, but they shouldn't be a farce and that is my feeling about that, and I feel that is the feudalistic-fief feeling.

I recall very vividly on the board of directors of Wheeling Steel the time that we were under indictment for violation of the antitrust laws, and as a director I didn't even know it. It was a time when there was a sentence; I think there was one prison sentence to someone from Bethlehem Steel who later became, after he was out 6 months later. president of another steel company.

Now, I know that Wheeling Steel at that time was just as guilty as any others, and I think they were guilty of something that was very disturbing to me at the time that they were keeping this from me. They kept it from me because I was a minority director.

Mr. TURNER. Were there any banks represented on that board of directors?

Mr. SIMON. At that time, I can only remember banks and suppliers. If you ask me was there anybody that wasn't a bank or supplier, it would be easier to name them, but I can name the banks and suppliers. One was Mr. Sterling of the First National City Bank; another was a man by the name of-well, he was the head of Blau-Knox. I was very critical of that man being on the board because

Mr. TURNER. We can get into that later.

Senator Muskie has arrived and I don't want to interfere with his time. We can get into this a little later.

Senator METCALF. Senator Muskie, I have suggested to Mr. Simon that when you did arrive we would interrupt the flow of the questions and recognize you. We want to pursue this line of questions that Mr. Turner has launched upon, but at this time, I would like to have the chairman of the other subcommittee that is sponsoring this hearing, Senator Muskie, make his opening statement and to recognize him for any interrogation he may have.

As I told them, you are one of the floor managers for the budget bill, a significant and important bill, that is now currently on the Senate floor, so you are in complete charge from now on.

OPENING STATEMENT OF SENATOR MUSKIE

Senator MUSKIE. Thank you, Mr. Chairman, and I apologize to you and Mr. Simon for being late, but I was involved in another ommittee executive session dealing with the energy emergency bill which we may or may not get to at some point during the existence of the emergency. I apologize for being late.

I wouldn't normally put this opening statement in the record at this point, but I think it might be helpful to read briefly from it in order that Mr. Simon might understand more fully the context within which I would find his testimony most useful.

We are here today to begin following up on a very significant report which has confirmed some of our greatest concerns about the extent of economic concentration in this country.

That report, "Disclosure of Corporate Ownership," has documented a situation which has been accelerating to an astonishing degree in recent years: That is, the fact that a few, very large banks, operating as institutional investors, are in a position to exercise control over the health and welfare of many of the Nation's largest corporations.

I want to emphasize that the report, "Disclosure of Corporate Ownership" is not intended to accuse anyone of an outright attempt to gain control of and manipulate the American corporate economy, although it may be that there are such attempts that have been made or that may be made, but the report itself makes no such accusation, although we have misconstrued it that way.

The report does give us facts about the nature of corporate ownership today which suggests all sorts of questions, and it is those questons that we want to raise. What the report does say is that a variety of circumstances and investment practices have resulted in a system of corporate ownership which makes regulation difficult, which discourages or excludes relatively small investors and businesses from the benefits of the system, and which radiates at least the appearance of serious conflicts of interest that, if real, make a mockery of free enterprise.

The report focuses on the widespread use of nominee accounts by fistitutional investors in ownership reports to the Federal regulatory agencies. I do not argue that the use of nominees, by itself, is

desirable. What is undesirable from the viewpoint of enlightened public policy is the extent to which this practice has obscured the real centration of stockholdings in the hands of a few large institutional nvestors, primarily banks.

An enlightened public policy requires nothing less than full public. dlosure of corporate ownership. This includes, not only a ready dentification of the institutions behind the nominee names, but also the discretionary control, including voting rights, exercised by these Institutions over their trustee accounts. I hope that these hearings will help to spur both the institutions and the Federal regulatory agencies to act on the report's basic recommendations in this regard. However, I want to emphasize that the single most important aspect

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