Speech 43
INADEQUACY OF STATE CONTROL OF GREAT CORPORATIONS
FROM THE PRESIDENT'S MESSAGE AT THE OPENING OF THE THIRD SESSION OF THE FIFTY EIGHTH CONGRESS, DECEMBER 6, 19O4

WHEN we come to deal with great corporations the need for the Government to act directly is far greater than in the case of labor, because great corporations can become such only by engaging in interstate commerce, and interstate commerce is peculiarly the field of the General Government.  It is an absurdity to expect to eliminate the abuses in great corporations by State action.  It is difficult to be patient with an argument that such matters should be left to the States, because more than one State pursues the policy of creating on easy terms corporations which are never operated within that State at all, but in other States whose laws they ignore.  The National Government alone can deal adequately with these great corporations.  To try to deal with them in an intemperate, destructive, or demagogic spirit would, in all probability, mean that nothing whatever would be accomplished, and, with absolute certainty, that if anything were accomplished it would be of a harmful nature.  The American people need to continue to show the very qualities that they have shown — that is, moderation, good sense, the earnest desire to avoid doing any damage, and yet the quiet determination to proceed, step by step, without halt and without hurry, in eliminating or at least in minimizing whatever of mischief or of evil there is to interstate commerce in the conduct of great corporations.  They are acting in no spirit of hostility to wealth, either individual or corporate.  They are not against the rich man any more than against the poor man.  On the contrary, they are friendly alike toward rich man and toward poor man, provided only that each acts in a spirit of justice and decency toward his fellows.  Great corporations are necessary, and only men of great and singular mental power can manage such corporations successfully, and such men must have great rewards.  But these corporations should be managed with due regard to the interests of the public as a whole.  Where this can be done under the present laws it must be done.  Where these laws come short others should be enacted to supplement them.

Yet we must never forget the determining factor in every kind of work, of head or hand, must be the man's own good sense, courage, and kindliness.  More important than any legislation is the gradual growth of a feeling of responsibility and forbearance among capitalists and wage workers alike; a feeling of respect on the part of each man for the rights of others; a feeling of broad community of interest, not merely of capitalists among themselves, and of wage workers among themselves, but of capitalists and wage workers in their relations to each other, and of both in their relations to their fellows who with them make up the body politic.  There are many captains of industry, many labor leaders, who realize this.  A recent speech by the president of one of our great railroad systems to the employees of that system contains sound common sense.  It runs in part as follows:

" It is my belief we can better serve each other, better understand the man as well as his business, when meeting face to face, exchanging views, and realizing from personal contact we serve but one interest, that of our mutual prosperity.

“Serious misunderstandings can not occur where personal goodwill exists and opportunity for personal explanation is present.

“In my early business life I had experience with men of affairs of a character to make me desire to avoid creating a like feeling of resentment to myself and the interests in my charge, should fortune ever place me in authority, and I am solicitous of a measure of confidence on the part of the public and our employees that I shall hope may be warranted by the fairness and good fellowship I intend shall prevail in our relationship.

" But do not feel I am disposed to grant unreasonable requests, spend the money of our company unnecessarily or without value received, nor expect the days of mistakes are disappearing, or that cause for complaint will not continually occur; simply to correct such abuses as may be discovered, to better conditions as fast as reasonably may be expected, constantly striving, with varying success, for that improvement we all desire, to convince you there is a force at work in the right direction, all the time making progress — is the disposition with which I have come among you, asking your goodwill and encouragement.

“The day has gone by when a corporation can be handled successfully in defiance of the public will, even though that will be unreasonable and wrong.  A public may be led, but not driven, and I prefer to go with it and shape or modify, in a measure, its opinion, rather than be swept from my bearings, with loss to myself and the interests in my charge.

“Violent prejudice exists toward corporate activity and capital today, much of it founded in reason, more in apprehension, and a large measure is due to the personal traits of arbitrary, unreasonable, incompetent, and offensive men in positions of authority.  The accomplishment of results by indirection, the endeavor to thwart the intention, if not the expressed letter of the law (the will of the people), a disregard of the rights of others, a disposition to withhold what is due, to force by main strength or inactivity a result not justified, depending upon the weakness of the claimant and his indisposition to become involved in litigation, has created a sentiment harmful in the extreme and a disposition to consider anything fair that gives gain to the individual at the expense of the company.

“If corporations are to continue to do the world's work, as they are best fitted to, these qualities in their representatives that have resulted in the present prejudice against them must be relegated to the background.  The corporations must come out into the open and see and be seen.  They must take the public into their confidence and ask for what they want, and no more, and be prepared to explain satisfactorily what advantage will accrue to the public if they are given their desires; for they are permitted to exist not that they may make money solely, but that they may effectively serve those from whom they derive their power.

" Publicity,  and  not  secrecy,  will win hereafter, and laws be construed by their intent and not by their letter, otherwise public utilities will be owned and operated by the public which created them, even though the service be less efficient and the result less satisfactory from a financial standpoint."

The Bureau of Corporations has made careful preliminary investigation of many important corporations.  It will make a special repost on the beef industry.

The policy of the Bureau is to accomplish the purposes of its creation by cooperation, not antagonism; by making constructive legislation, not destructive prosecution, the immediate object of its inquiries; by conservative investigation of law and fact, and by refusal to issue incomplete and hence necessarily inaccurate reports.  Its policy being thus one of open inquiry into, and not attack upon, business, the Bureau has been able to gain not only the confidence, but, better still, the cooperation of men engaged in legitimate business.

The Bureau offers to the Congress the means of getting at the cost of production of our various great staples of commerce.

Of necessity the careful investigation of special corporations will afford the Commissioner knowledge of certain business facts, the publication of which might be an improper infringement of private rights.  The method of making public the results of these investigations affords, under the law, a means for the protection of private rights.  The Congress will have all facts except such as would give to corporation information which would injure the legitimate business of a competitor and destroy the incentive for individual superiority and thrift.

The Bureau has also made exhaustive examinations into the legal condition under which corporate business is carried on in the various States; into all judicial decisions on the subject; and into the various systems of corporate taxation in use.  I call special attention to the report of the chief of the Bureau; and I earnestly ask that the Congress carefully consider the report and recommendations of the Commissioner on this subject.

The business of insurance vitally affects the great mass of the people of the United States and is national and not local in its application.  It involves a multitude of transactions among the people of the different States and between American companies and foreign Governments.  I urge that the Congress carefully consider whether the power of the Bureau of Corporations can not constitutionally be extended to cover interstate transactions in insurance.

Above all else, we must strive to keep the highways of commerce open to all on equal terms; and to do this it is necessary to put a complete stop to all rebates.  Whether the shipper or the railroad is to blame makes no difference; the rebate must be stopped, the abuses of the private car and private terminal track and sidetrack systems must be stopped, and the legislation of the Fifty eighth Congress which declares it to be unlawful for any person or corporation to offer, grant, give, solicit, accept, or receive any rebate, concession, or discrimination in respect of the transportation of any property in interstate or foreign commerce whereby such property shall by any device whatever be transported at a less rate than that named in the tariffs published by the carrier must be enforced.  For some time after the enactment of the Act to Regulate Commerce it remained a mooted question whether that act conferred upon the Interstate Commerce Commission the power, after it had found a challenged rate to be unreasonable, to declare what thereafter should, prima facie, be the reasonable maximum rate for the transportation in dispute.  The Supreme Court finally resolved that question in the negative, so that as the law now stands the Commission simply possess the bare power to denounce a particular rate as unreasonable.  While I am of the opinion that at present it would be undesirable, if it were not impracticable, finally to clothe the Commission with general authority to fix railroad rates, I do believe that, as a fair security to shippers, the Commission should be vested with the power, where a given rate has been challenged and after full hearing found to be unreasonable, to decide, subject to judicial review, what shall be a reasonable rate to take its place; the ruling of the Commission to take effect immediately, and to obtain unless and until it is reversed by the court of review.  The Government must in increasing degree supervise and regulate the workings of the railways engaged in interstate commerce; and such increased supervision is the only alternative to an increase of the present evils on the one hand or a still more radical policy on the other.  In my judgment the most important legislative act now needed as regards the regulation of corporations is this act to confer on the Interstate Commerce Commission the power to revise rates and regulations, the revised rate to at once go into effect, and to stay in effect unless and until the court of review reverses it.
Steamship companies engaged in interstate commerce and protected in our coastwise trade, should be held to a strict observance of the interstate commerce act.

FEDERAL REGULATION OF THE INTERSTATE RAILWAYS
ADDRESS   DELIVERED   BEFORE   THE   UNION   LEAGUE CLUB,   PHILADELPHIA,   JANUARY   30,

THIS club was founded to uphold the hands of Abraham Lincoln when he stood as the great leader in the struggle for union and liberty.  We have a right, therefore, to appeal to this club for aid in every governmental or social effort made along the lines marked out by Lincoln.  The great President taught many lessons which we who come after him should learn.  Among the most important of these was the lesson that for weal or woe we are indissolubly bound together, in whatever part of the country we live, whatever our social standing, whatever our wealth or our poverty, whatever form of mental or physical activity our life work may assume.  Lincoln, who was, more emphatically than any other President we have ever had, the President of the plain people, was yet as far removed as Washington himself from the slightest taint of demagogy.  With his usual farsighted clearness of vision he saw that in a republic such as ours permanent prosperity of any part of our people was conditioned upon the prosperity of all; and that on the other hand any effort to raise the general level of happiness by striking at the well being of a portion of the people could not be but in the end disastrous to all.

The principles which Lincoln applied to the solution of the problems of his day are those which we must apply if we expect successfully to solve the different problems of our own day — problems which are so largely industrial.  Exactly as it is impossible to develop a high morality unless we have as a foundation those qualities which give at least a certain minimum of material prosperity, so it is impossible permanently to keep material prosperity unless there is back of it a basis of right living and right thinking.  In the last analysis, of course, the dominant factor in obtaining this good conduct must be the individual character of the average citizen.  If there is not this condition of individual character in the average citizenship of the country, all effort to supply its place by the wisest legislation and administration will in the end prove futile.  But given this average of individual character, then wise laws and the honest administration of the laws can do much to supplement it.  If either the business world or the world of labor loses its head, then it has lost something which can not be made good by any governmental effort.  Our faith in the future of the Republic is firm, because we believe that on the whole and in the long run our people think clearly and act rightly.

Unquestionably, however, the great development of industrialism means that there must be an increase in the supervision exercised by the Government over business enterprises.  This supervision should not take the form of violent and ill advised interference; and assuredly there is danger lest it take such form if the business leaders of the business community confine themselves to trying to thwart the effort at regulation instead of guiding it aright.  Such men as the members of this club should lead in the effort to secure proper supervision and regulation of corporate activity by the Government, not only because it is for the interest of the community as a whole that there should be this supervision and regulation, but because in the long run it will be in the interest above all of the very people who often betray alarm and anger when the proposition is first made.

Neither this people nor any other free people will permanently tolerate the use of the vast power conferred by vast wealth and especially by wealth in its corporate form, without lodging somewhere in the Government the still higher power of seeing that this power, in addition to being used in the interest of the individual or individuals possessing it, is also used for and not against the interests of the people as a whole.  Our peculiar form of government, a Government in which the Nation is supreme throughout the Union in certain respects, while each of nearly half a hundred States is supreme in its part of the Union in certain other respects, renders the task of dealing with these conditions especially difficult.  No finally satisfactory result can be expected from merely State action.  The action must come through the Federal Government.  The business of the country is now carried on in a way of which the founders of our Constitution could by no possibility have had any idea.

All great business concerns are engaged in interstate commerce, and it was beyond question the intention of the founders of our Government that interstate commerce in all its branches and aspects should be under national and not State control.  If the courts decide that this intention was not carried out and made effective in the Constitution as it now stands then in the end the Constitution, if not construed differently, will have to be amended so that the original undoubted intention may be made effective.  But, of course, a constitutional amendment is only to be used as a last resort, if every effort of legislation and administration shall have been proved inadequate.

Meanwhile the men in public life and the men who direct the great business interests of the country should work not in antagonism but in harmony toward this given end.  In entering a field where the progress must of necessity be so largely experimental it is essential that the effort to make progress should be tentative and cautious.  We must grow by evolution, not by revolution.  There must be no hurry, but there must also be no halt; and those who are anxious that there should be no sudden and violent changes must remember that precisely these sudden and violent changes will be rendered likely if we refuse to make the needed changes in cautious and moderate manner.

At the present moment the greatest need is for an increase in the power of the National Government to keep the great highways of commerce open alike to all on reasonable and equitable terms.  Less than a century ago these highways were still, as they had been since the dawn of history, either waterways, natural or artificial, or else ordinary roads for wheel vehicles drawn by animal power.  The railroad, which was utterly unknown when our Government was formed and when the great principles of our jurisprudence were laid down, has now become almost everywhere the most important, and, in many large regions, the only form of highway for commerce.  The man who controls its use can not be permitted to control it in his own interest alone.

It is not only just, but it is in the interest of the public, that this man should receive the amplest payment for the masterful business capacity which enables him to benefit himself while benefiting the public; but in return he must himself recognize his duty to the public.  He will not and can not do this if our laws are so defective that in the sharp competition of the business world the conscientious man is put at a disadvantage by his less scrupulous fellows.  It is in the interest of the conscientious and public spirited railway man that there should be such governmental supervision of the railway traffic of the country as to require from his less scrupulous competitors, and from unscrupulous big shippers as well, that heed to the public welfare which he himself would willingly give, and which is of vital consequence to the small shipper.  Every important railroad is engaged in interstate commerce.  Therefore, this control over the railroads must come through the National Government.

The control must be exercised by some governmental tribunal, and it must be real and effective.  Doubtless there will be risk that occasionally, if an unfit President is elected, this control will be abused; but this is only another way of saying that any adequate governmental power, from the power of taxation down, can and will be abused if the wrong men get control of it.

The details must rest with the lawmakers of the two Houses of Congress; but about the principle there can be no doubt.  Hasty or vindictive action would merely work damage; but in temperate, resolute fashion, there must be lodged in some tribunal the power over rates, and especially over rebates — whether secured by means of private cars, of private tracks, in the form of damages, or commissions, or in any other manner — which will protect alike the railroad and the shipper, and put the big shipper and the little shipper on an equal footing.  Doubtless no law would accomplish all that enthusiasts hope; there is always disappointment over results of such a law among the oversanguine; but very real and marked good has come from the legislation and administration of the last few years; and now, as part of a coherent plan, it is entirely possible, and, indeed, necessary to enact an additional law which will mean further progress along the same lines of definite achievement in the direction of securing fair dealing as between man and man.

In some such body as the Interstate Commerce Commission there must be lodged in effective shape the power to see that every shipper who uses the railroads and every man who owns or manages a railroad shall on the one hand be given justice and on the other hand be required to do justice.  Justice — so far as it is humanly possible to give and to get justice — is the foundation of our Government.  We are not trying to strike down the rich man; on the contrary, we will not tolerate any attack upon his rights.  We are not trying to give an improper advantage to the poor man because he is poor, to the man of small means because he has not larger means; but we are striving to see that the man of small means has exactly as good a chance, so far as we can obtain it for him, as the man of larger means; that there shall be equality of opportunity for the one as for the other.

We do not intend that this Republic shall ever fail as those republics of olden times failed, in which there finally came to be a government by classes, which resulted either in the poor plundering the rich or in the rich exploiting and in one form or another enslaving the poor; for either event means the destruction of free institutions and of individual liberty.  Ours is not a Government which recognizes classes.  It is based on the recognition of the individual.  We are not for the poor man as such, nor for the rich man as such.  We are for every man, rich or poor, provided he acts justly and fairly by his fellows, and if he so acts the Government must do all it can to see that inasmuch as he does no wrong, so he shall suffer no wrong.