Mr. SUNDLUN. I hope this corporation will prove to be a gold mine, a real gold mine.

Senator SYMINGTON. I respect your interest along those lines, and am not saying you are wrong. But whether right or wrong, when do you think the gold is going to start coming out?

Mr. SUNDLUN. In order to float the initial offering, which is one of the express things required of us under the act, we must be able to give the stockholders the knowns and the unknowns of this new field of endeavor, both as to cost and as to revenue and, consequently, when we go out with a prospectus on the initial offering, that information must be available to the prospective stockholder.

Senator SYMINGTON. In your stock prospectus, you are going to extrapolate when you think the corporation will begin to earn money, is that correct?

Mr. SUNDLUN. All we can do and all we are legally permitted to do is to state the knowns and unknowns of cost and possible revenue. We are not in the position, at this point, certainly, of projecting a possible profit and loss statement.

Senator SYMINGTON. When you are to a point where you think you know when the corporation might begin to have earnings, will you let this committee know?

Mr. SUNDLUN. Yes, sir.

Senator SYMINGTON. When you get to a point when you think you can guess when earnings will start, will you let us know? Mr. SUNDLUN. Yes, Senator.

SALARIES IN THE COMMUNICATIONS INDUSTRY

Senator SYMINGTON. Thank you.

Mr. Harris made this statement, and I quote:

The salaries paid to Messrs. Welch and Charyk are low compared with those paid to executives with similar responsibilities in the communications industry. As a matter of interest, one of the largest companies in this field pays its president $138,000, not far higher than $125,000.

I make this record because of the problem we may have, having backed this bill, and all I have heard of Mr. Welch has been superlative.

Could you give an example of a similar job in the communications industry, a company starting out, with uncertainty as to its future profits, where anything comparable to these salaries has ever been paid before in the history of communications?

Mr. SUNDLUN. I cannot give you any similar experience of any other corporation which is comparable to this one. I think it is distinctly unique from both a commercial and a legislative status.

(The following statement was subsequently submitted by Mr. Sundlun for clarification:)

We know of no job facing any corporate officials today which is as difficult as the assignment facing Mr. Welch and Dr. Charyk. The fact that they have to start out from scratch, with virtually no organization or personnel, does not mean that their job will be easier than that faced by the leaders of established communications companies or that they should be paid less. On the contrary, their job of building a highly competent organization in the shortest practicable time, of developing the necessary skills in the technical, economic, and international fields, is far more challenging than the job of managing a well-established, thriving corporation. This was well expressed, I believe, in an editorial in the Baltimore Sun, of March 1, as follows:

"EASY PICKINGS

"If the reports that their salaries will be $125,000 and $80,000, respectively, are correct, Leo D. Welch and Joseph V. Charyk have grabbed off some pretty choice assignments as chairman and president of the new Communications Satellite Corp. Or have they? All they are asked to do is to breathe life into a gigantic brain child which at the moment has no assets, no income, only the faintest idea of how it is going to do what it is supposed to do, and the prospect of a $5 million debt in the next 12 months.

"Soft jobs? Not by a long shot. The Satellite Corp. as nearly everyone knows, is supposed to station in the sky a network of orbiting switchboards to take over the earth's growing load of long-distance communications. What kind of satellites? They aren't sure yet; flying how high? No decision. Serving how many foreign countries, and through what arrangements? Still to be decided. And costing how much? They'll get around to estimating that by the time of the first stock sale, about a year from now. "These are some of the large problems facing Messrs. Welch and Charyk, their unnamed associates, and their unappointed staff. They are highly complex questions, and for all their solid qualifications both men will have their moments of discomfort. In a few years, of course, when success is assured, people will be saying, 'Why, for that kind of money I could have done it myself.' Sure, all it takes is genius."

As the initial board of directors responsible for launching this venture, we are convinced that its future success rests in large part upon the talents, the wisdom, and the dedication of these two executives. They face the most difficult task in American industry today. They have agreed to work for us at less than they could earn from other companies. Their salaries are substantially lower than those paid by communications companies whose top executives face considerably less challenging assignments. In our opinion, the Communications Satellite Corp.-and the public interest-will be most fortunately served by having these outstanding men guiding this venture in the months and years ahead.

With regard to Mr. Harris' statement that the salaries paid to Mr. Welch and Dr. Charyk are low compared with those paid to executives with similar responsibilities in the communications industry, I should like to point out for the record that, on the basis of materials on file with the Securities and Exchange Commission, we understand that the remuneration paid by certain of the leading communications companies to their principal executive officers for the year 1961 or comparable fiscal years was as follows:

American Telephone & Telegraph Co.:

Chairman of the board__

President_-_.

General Telephone & Electronics Corp.:

Chairman of the board and chairman of board of subsidiary__.

President and president of subsidiary-

International Telephone & Telegraph Corp.:

President--

Senior vice president----

Radio Corp. of America:

Chairman of the board_.

President____

1 Plus $100,000 bonus.

RELATIONSHIP BETWEEN CORPORATION AND NASA

Senator SYMINGTON. I would pursue this question of the relationship between the corporation and NASA regarding research and development expenditures.

Would you agree if NASA does the research and development and the corporation does not pay for it, this is something less than a private corporation?

Mr. SUNDLUN. The act in two of its sections, section 201 (b) (3) and (5) makes express mention of reimbursement for launching and

associated services. There is nothing stated anywhere else in the act with regard to reimbursement.

Senator SYMINGTON. What we have a right a right to know is the thinking behind the presentations being made to us before we lose all grip on this corporation we backed, and we have seen passed by the Congress.

I asked you whether you consider this was a semipublic corporation. You said no, you did not, you thought it was completely a private corporation.

Now, my question again is. If NASA does the research and development, and the corporation does not pay for it but obtains the advantages of it, isn't this something less than the private corporation we have claimed it was?

Mr. SUNDLUN. I think if you are talking about past research or forward research, the answers might be different. But I submit, sir

Senator SYMINGTON. I am not talking about the past. The chairman read there would be some $55 million of research and development by NASA in this field the taxpayer will pay for, and you will obtain the advantages therefrom.

Under those circumstances would you call this a private corporation?

Mr. SUNDLUN. I think the answer to that is that, No. 1, our position as an industry is not much different from other industries, such as aircraft, atomic energy, agriculture, or maritime, in which considerable Government research and development money has gone at one time or another.

But I would come back to the answer which, I believe, I gave to the chairman, Senator, and that is that the act requires NASA to cooperate with this corporation expressly to the extent that NASA deems it is in the national interest, and this certainly involves the Congress because the Congress must appropriate the money.

I would submit, sir, that in all of these NASA projects there are many other advantages to be gained for other defense and NASA projects, not particular to the Satellite Corp.

The CHAIRMAN. Would the Senator from Missouri permit a statement by me?

Senator SYMINGTON. Yes.

STATEMENT BY INCORPORATORS ON NATURE OF CORPORATION

The CHAIRMAN. May I say that when you come to this part of the transcript and study it that you might check with your other directors to see if you cannot give a somewhat different answer to Senator Symington. This is not a completely private organization, and in my opinion we only delude ourselves when we maintain that it is.

I just hope you will take a good, careful look at it because I believe Senator Symington is entitled to almost a "yes" or "no" answer, and he is not getting it.

I do not blame you because it is a very difficult question to answer. But I do believe there are other facets of this corporation than just the old concept of a private organization.

I believe they are going to want some help from the Federal Government. I am one of those who, as Senator Symington knows,

strongly supported the act, and I have no regret. But I do believe there may be areas where the Federal Government may want to put in some money, and you might recognize that fact at a later date.

I only suggest that you review this part of the testimony rather closely and that you and Mr. Welch may have some final suggestions to make in the final drafting of a statement which the Chair will permit to be inserted in the record at this point, if you so desire. Mr. SUNDLUN. Thank you, sir.

(The statement referred to follows:)

In accordance with the chairman's request, we have given this matter further consideration. As with other matters, we first took our guide directly from the Communications Satellite Act. Section 102(c) of that act states: "In order to facilitate this development and to provide for the widest possible participation by private enterprise, U.S. participation in the global system shall be in the form of a private corporation, subject to appropriate governmental regulation." Section 301 of the act states: "There is hereby authorized to be created a communications satellite corporation for profit which will not be an agency or establishment of the U.S. Government.

We next reexamined the reports of the House Interstate and Foreign Commerce Committee, the Senate Aeronautical and Space Sciences Committee, and the Senate Commerce Committee in connection with this legislation. Each of these reports, in similar language, states that the purpose of the legislation is to bring into being a private corporation which will become the U.S. participant in a global communications satellite system.

In the light of the legislative history, we believe that the decision of the Congress was that the corporation should be essentially private in character; we agree fully, however, with the statement of Chairman Anderson that there are "other facets" to the matter. In legal terms, the corporation is a private corporation "affected with a public interest." Indeed, this corporation is uniquely imbued with an obligation under the act to serve the public interest, and the Congress clearly contemplated a high degree of cooperation between the executive branch and the corporation to this end. To assure this result, Congress made the corporation subject to extensive Federal regulation and also provided that the incorporators themselves and three members of the permanent board of directors are to be Presidential nominees, subject to confirmation by the Senate. This public interest has been and continues to be everpresent in the minds of the incorporators.

NASA SHOULD CONTINUE RESEARCH AND DEVELOPMENT

Senator SYMINGTON. I thank the Chair. We were in on the engagement. Now that the marriage is about to take place, I remember the line, "Speak now, or forever hold your peace."

I have two more questions: Do you believe NASA needs to continue research and development so there is no unnecessary lag while the corporation is getting formed?

Mr. SUNDLUN. Yes, sir.

DEALINGS WITH NASA WILL BE SUBJECT TO NEGOTIATION

Senator SYMINGTON. NASA does the research and development. If it does so at the corporation's request, should the latter pay for it just as it would if contracted out to another private company?

Mr. SUNDLUN. The act states expressly that if we make a request for a satellite launching and associated services, it must be on a reimbursable basis.

Senator SYMINGTON. I am not asking about launchings. You know enough about the field we are discussing to know there would be a great deal of research and development beyond the launching.

But if you request NASA to do work in order to further your particular interest as a corporation, which I am certain, if I were in the position of, say, Dr. Charyk, I would be doing, should the corporation pay for the work just as if it contracted it out to a private group? Mr. SUNDLUN. If we specifically request NASA to do something, I assume that it will be subject to negotiations between us, and the question will be resolved in the course of those negotiations.

Senator SYMINGTON. So you do not want to commit yourself now as to whether this corporation should pay for any research and development it has requested of NASA, is that correct?

Mr. SUNDLUN. That is correct, sir.

Senator SYMINGTON. Well, I disagree with your position. You say this is a completely private corporation, not a semipublic corporation. You have a relatively small line of credit, from the standpoint of the scope of the operation you are undertaking; and you have only taken down 10 percent of that commitment. I would hope you all would be very, very careful about where the money goes, at the same time you are expressing your independence of the Government in your concept of the position of this company.

I have been in at the birth, and at times the death, of many corporations in the past, and have never run into one like this before. Your testimony does not satisfy me with respect to my concept of what kind of a corporation I was voting for last fall.

Thank you, Mr. Chairman.

(The following statement was subsequently submitted by Mr. Sundlun for clarification:)

By saying that we would negotiate with NASA, I meant to indicate that we accept the principle of reimbursement when the corporation requests NASA to perform research work for the sole and specific benefit of the corporation, and that we would have to negotiate the form and amount on an equitable basis case by case.

The CHAIRMAN. Senator Keating.

STATEMENT BY INCORPORATORS ON CHANGING THE ACT

Senator KEATING. Mr. Chairman, I have no questions to ask Mr. Sundlun.

I do want to ask the chairman or counsel this question:

It seems to me that the chairman made some very good points with regard to these articles of incorporation.

If we do not like these in any respect, is there anything legally that we can do about it?

The CHAIRMAN. I will say to you I do believe I had hoped that the Board itself might suggest that there ought to be some parity between contributions, and I would hope the Board would respond to that and perhaps, come up with a suggestion.

(The following statement was submitted by the incorporators:)

The incorporators do not believe that any change in the act or in the articles of incorporation is required at this time to deal with the possibility that the carriers may purchase substantially less than 50 percent of the voting stock to be offered for sale by the corporation.

As Senator Pastore observed in a statement filed during the floor debate, it was then "expected that the carriers would purchase substantially the full 50 percent of the voting stock of the corporation which is reserved for them by the