The CHAIRMAN. What exhibit is that? Mr. Cook. That is exhibit No. 1, not included among the photostats. It is in the special folder such as this, which has been handed to the committee, exhibit No. 1.1 Mr. DENTON. Do we have that? Mr. Cook. We did not have enough sets for all the members of the committee. I believe there are at least three available. The CHAIRMAN. Go ahead. Mr. Cook. (2) We prepared an alphabetical listing of all the companies and associations with which any of the 242 officers and directors is affiliated, the position he holds in each, and the 16 steel companies with which he is affiliated. (3) A selective list showing for each steel company the ore, mining, and coke companies and the banks or financial institutions with which it has a common director or directors. Those three tabulations are exhibits Nos. 1, 2, and 3. The CHAIRMAN. Two and three are together; are they not? Several general observations may be made after examining these lists: First, all but 1 of the 16 steel company boards have directors who are also affiliated with fabricators and other consumers of steel. Second, Bethlehem Steel Corp. is unique in that none of its directors, so far as we have been able to ascertain, has any affiliations outside of Bethlehem and its subsidiary companies. Third, each of the other 15 steel companies has common directors with coal and coke, mining, banking, and financial institutions. For example, Crucible Steel has common directors with three coke and mining companies and six financial institutions; Armco has common directors with 11 banks, financial institutions, and underwriting firms; National Steel with 12 mining and coke companies and 12 in the financial field; Pittsburgh Steel with 7 mining and coke and 12 financial institutions; United States Steel with 6 mining and coke companies and 16 financial institutions. Fourth, the number of investment banking firms having common directors with companies is rather small: Drexel & Co. and Alan Wood Steel Co. have one common director; Baker, Weeks & Harden has one common director with Armco; Allen & Co. and Hamlin & Lunt each has common directors with Colorado Fuel & Iron; Otis & Co., and Portsmouth Steel have a common director; J. P. Morgan & Co., Inc., and United States Steel have a common director as do Pershing & Co. and Wheeling Steel. Fifth, in only one instance is a director of one of the 16 steel companies also named as a director of another of the 16 companies. The CHAIRMAN. Is that not a violation of law? Mr. Cook. In a moment I will advert to it in considerable detail, and if I may, I would like to reserve the answer until that time, Mr. Chairman. That exception is Mr. J. H. Hillman, Jr., who is a director both of Alan Wood Steel Co. and Pittsburgh Steel Co. This material appears in exhibits S-196 and S-197 in Steel Exhibits, pp. 395–446. * These exhibits are exhibits S-196 through S-199 in Steel Exhibits, pp. 395-474. Sixth, directors of different steel companies frequently serve together on the boards of other companies. For example, Crucible Steel Co. and Inland Steel Co. each has a director who is also on the board of American Brake Shoe Co. The CHAIRMAN. We had testimony from Mr. Kerr just a moment ago along those lines; did we not? Mr. Cook. Yes; that is right. On the board of Anchor Hocking Glass Corp. are directors of Jones & Laughlin Steel Corp. and Youngstown Sheet & Tube Co. The Cleveland, Cincinnati, Chicago & St. Louis Railroad has common directors with both Jones & Laughlin Steel Corp. and Armco Steel Corp. The board of Goodyear Tire & Rubber Co. has common directors with four of the steel companies; Great Lakes Steamship Co. with three; Industrial Rayon with three; New York Central Railroad Co. with three, et cetera, and there are, of course, many other apparent from the tabulations which we have prepared for the committee. The American Iron & Steel Institute, a steel trade association, has 32 directorships, of which we are informed 14 were held by directors from 11 of the companies in this study. There are numerous financial institutions having common directors with the steel companies, and in at least eight instances there are common directors with two or more of the steel companies, as follows: Chase National Bank: Armco Steel Corp. United States Steel Corp. Chemical Bank & Trust Co. (New York): United States Steel Corp. Alan Wood Steel Co. Pittsburgh Steel Co. Equitable Life Assurance Society of the United States: United States Steel Corp. Armco Steel Corp. Mellon National Bank & Trust Co.: Jones & Laughlin Steel Corp. National City Bank of Cleveland: Youngstown Sheet & Tube Co. Northern Trust Co.: United States Steel Corp. Inland Steel Co. Peoples First National Bank & Trust Co. (Pittsburgh): Alan Wood Steel Co. Pittsburgh Steel Co. Jones & Laughlin Steel Corp. Wheeling Steel Corp. National Steel Corp. Union National Bank (Pittsburgh): Pittsburgh Steel Co. Sharon Steel Corp. Several ore companies have common directors with more than one of the steel companies. In many instances we know, however, that this is due to joint ownership of the properties. For example: The Donner-Hanna Coke Corp. and Economy Fuel & Supply Corp. are each owned 50 percent by the Hanna Furnace Corp., which is a wholly owned subsidiary of National Steel Corp., and 50 percent by Republic Steel Corp. Half of the members of the board of directors of Donner-Hanna Coke represent the interest of National Steel and half the interest of Republic Steel. Each of the steel companies has one of its directors on the board of Donner-Hanna. Inland Steel Co. owns 50 percent of the voting stock of Michigan Mineral Land Co., Mahland Ore Co., Philbin Mining Co., and Hurlbut Calcium & Chemical Co. According to a filing by Inland, its interest in each of these companies is represented by half of the members of the board. The other half represents the interests of the other stockholders. The management of each of the companies is supervised respectively by Cleveland-Cliffs Iron Co., Hanna Iron Ore Co. (a subsidiary of National Steel Corp.), Butler Bros., and F. Hurlbut Co. Existence of effective control is disclaimed by Inland Steel Co. However, it is not possible from Commission records to relate all the cases of interlocking with ore companies due to stock ownership. The CHAIRMAN. You said: Existence of effective control is disclaimed by Inland Steel Co. Will you amplify that? Mr. Cook. I regret I did not hear you, sir. The CHAIRMAN. The next to last sentence you read: The existence of effective control is disclaimed by Inland Steel Co. The CHAIRMAN. Will you amplify that? Mr. Cook. In filings with the Commission the facts as to stock ownership are required to be set forth. If a company desires, although stock ownership may tend to indicate a contrary conclusion, it may disclaim that as a fact it actually controls any particular company. Inland has done so in this instance. The CHAIRMAN. Despite the fact that it admits it owns 50 percent of the voting stock of these companies? Mr. Cook. That is true, sir. The CHAIRMAN. And, in addition, has four members of the board. Mr. Cook. That is true, sir. Our forms require a company to report only subsidiary relationships where there is more than 50 percent stock control. In any event, we do know that there are interlocking directorates between the following companies: Mesaba-Cliffs Mining Co.1 Inland Steel Co. Jones & Laughlin Steel Corp. Steel Rock Iron Mines, Ltd. Republic Steel Corp. Portsmouth Steel Corp. Susquehanna Ore Co. Inland Steel Co. Republic Steel Corp.2 Mahoning Ore & Steel Co. Youngstown Sheet & Tube Co. Crucible Steel Co. of America Montreal Mining Co. Jones & Laughlin Steel Corp. 1 Pittsburgh Steel Corp. has none of its officers or directors on the board but owns 16 percent of the stock and disclaims control. 2 Republic owns 50 percent of the voting stock of Susquehanna Ore Co. Cleveland Cliffs Iron Co. Republic Steel Corp. Jones & Laughlin Steel Corp. The CHAIRMAN. Mr. Kerr testified that a director of Cleveland Cliffs is also a director of Inland Steel, to wit, Mr. Edward Brown. Mr. Cook. Yes. We do not have him in our list, and I assume the reason for it is that he either has later information or more extensive information than we have. The CHAIRMAN. Well, I understand the testimony of Mr. Kerr was to the effect that Mr. Edward Brown was just recently made a member of the board of Inland Steel. Therefore, you probably did not have that information. Mr. Cook. Yes; that would constitute a further interlocking relationship. I mentioned earlier that we have found only one instance of direct interlocking by a common directorship between the boards of any of the 16 steel producers studied. That was in the case of Mr. J. H. Hillman, Jr., who is a director both of Alan Wood Steel Co. and Pittsburgh Steel Co. Mr. Hillman is also president and a director of the Texas Gas Transmission Co. He has a similar position with Pennsylvania Bankshares & Securities Corp., and Pennsylvania Industries, Inc. He is a director and chairman of the board of Pittsburgh Coke & Chemical Co., which is in the business of pig iron, cement, coke, and chemicals, and president of Hillman Coal & Coke Co., which is in the coal and coke business. He is also a director of two banks, two industrial concerns, and a steamship company. In filings made with the Commission, Pittsburgh Steel Co. discloses that Mr. Hillman held of record but not beneficially, as of December 12, 1949, 20.8 percent of the outstanding voting shares of the company, and that Mr. Hillman and Pennsylvania Industries, Inc., together owned beneficially 20.8 percent of the outstanding voting securities of the company. Pennsylvania Industries, Inc., is controlled indirectly by Hillman Land Co., of which company Mr. Hillman and his family own all the outstanding stock. The CHAIRMAN. Before you leave Mr. Hillman- Filings of the company also reveal that for the year ended December 31, 1948, Sharon Steel Corp. was the beneficial owner of 22,649 shares of common stock (4.45 percent) of Pittsburgh Steel and that "approximately 8 percent of the outstanding voting shares of the Sharon Steel Corp. are owned by corporations indirectly controlled by Hillman Land Co." A filing by the Alan Wood Steel Co. states that On December 1, 1947, Neville Coke & Chemical Co., which is an associate of J. H. Hillman, Jr., owned 32,932 shares (16.5 percent) of the common stock. It would thus appear that Mr. Hillman is in a position to affect the affairs of 3 of the 16 steel companies, namely, Alan Wood Steel Co., Pittsburgh Steel Co., and Sharon Steel Corp. Mr. LEVI. That does appear to be a violation of the Clayton Act, does it not? Mr. Cook. I have been a lawyer for some years, all of us, of course, dislike giving curbstone opinions. When we do, we sometimes live to regret it. I would say this: The terms of the Clayton Act are clear, these facts are unequivocal. I would say that prima facie you have material before you which prudence would cause you to refer to the Justice Department, the Antitrust Division, for their examination. Mr. LEVI. Have you notified the Department of Justice, Mr. Cook? Mr. Cook. I have not. I had the feeling that we were here as a servant of the committee and the committee would take whatever steps were appropriate on the basis of the information we disclosed to it." The CHAIRMAN. I think I will take it upon myself to send a transcript of this testimony that you are now giving concerning this gentleman-namely, Mr. Hillman. Mr. Cook. We also, for the sake of completeness and for whatever value it may have, inquired to a limited extent into various professional services used by the steel companies. Up to now I have been describing the affiliations of directors and officers of the 16 steel companies as one type of relationship which may exist between these companies. It should be recognized that affiliations of this type, should they exist, need not be evidenced by so formal a relationship as that of the interlocking directorate. Such affiliations may be expressed in numerous more subtle and indirect ways. We have accordingly examined the legal, accounting, and other professional groups whose services might be used by more than 1 of the 16 companies to ascertain wherein such persons may serve more than one of the steel companies. We have prepared a chart showing for each of the steel companies the name of the accounting firm which audited its accounts for 1948 as filed with the Commission, legal counsel whose names are given in various filings with the Commission, and the transfer agent and registrar as given in the standard corporation manuals.1 One of the most significant things to be observed is that one accounting firm, Price, Waterhouse & Co., audited 8 of the 16 companies. The chart I refer to is marked as exhibit H. Ernst & Ernst audited four; Haskins & Sells two; and Peat, Marwick, Mitchell & Co., and Arthur Young & Co. one each.2 The list of attorneys cannot be considered exhaustive. The information is taken, except in the few cases indicated, from the annual reports filed by the companies with the Commission for their 1948 fiscal years. The list may not be complete even for the years checked, because the Commission's reporting requirements through 1948 did not require disclosure of information of this kind unless the company had paid $20,000 or more for services during the fiscal year, except where a director of the company was also a member of a law firm which received fees from the company. The CHAIRMAN. Apparently the fact that Price, Waterhouse & Co. audited 8 of the 16 companies mentioned, Ernst & Ernst audited four, points up the fact that at least eight of these companies are willing to 1 The chart referred to appears in exhibit S-200 in Steel Exhibits, pp. 475–476. Of 2,295 certified financial statements filed with the Commission in 1948, Price, Waterhouse & Co. certified 244, Ernst & Ernst 229, Haskins & Sells 192, Arthur Anderson 178. Peat, Marwick, Mitchell & Co. 136, and Arthur Young & Co. 82. 96347-50-ser. 14, pt. 4a- 30 |