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Commission grants the license. From that we have an analogy for the licensing of other corporations engaged in interstate commerce. I have a list which I would like to put in this memorandum, if the committee will be good enough to grant me the time.

Senator O’MAHONEY. The committee will be very glad to receive your memorandum.

(The memorandum referred to will be found at the close of Mr. Ogburn's statement.)

Mr. OGBURN. I have a number of instances of licenses which Congress has required of corporations.

Professor Beard and other witnesses have dealt with our State corporation laws. He has recommended to you very highly the book of Berle and Means. It would be superflous for me to even take from this book any particular fact that this committee needs to know. I might say that in my practice I have had to pass on a number of securities issued by corporations and banking houses. I know full well the corporate law of a number of States. I know that most of those laws of States which appeal to businessmen to incorporate under them are so framed that the stockholders are often not fully protected. The laws of a number of our States are so framed that the directors have authority to do things which the stockholders themselves, if they fully understood their implication, would probably not want to grant that right to those directors.

We cannot expect 48 States to prepare a body of corporate law which, from the point of view of the members of this committee and members of Congress generally, would meet the requirements for the protection of stockholders.

Senator O'MAHONEY. Is it not a fact, Mr. Ogburn, that some of these State laws permit directors to be elected who have no interest whatsoever in the corporation of which they are officers or directors?

Mr. OGBURN. Yes.

Senator O’MAHONEY. Is it not a fact that some of these State laws permit such directors, as directors of the corporation, to enter into contracts between that corporation and themselves or other corporations, in which they are interested and have an interest adverse, as a matter of fact, to the interests of the stockholders they are supposed to represent?

Mr. OGBURN. Quite so. I received the information to which I am about to refer in my professional capacity, so I could not very well disclose it, but I know of one instance where a short line railroad had been offered to one of the main railroad systems, for a million dollars, and the main system did not buy that road. Later that short line came into the possession of one of the directors, and later the main system acquired the short line, for which it paid six times as much as it was originally offered for. Those things were permitted by the corporation laws under which they were operating:

Senator McCARRAN. Do you consider a measure of this kind as being capable of properly curing all of these things we hear about, with reference to the acts and conduct of corporations, permitted under the laws of the respective States? Is it not true that this legislation is primarily intended to point out those conditions which affect the people generally throughout the country, by reason of the commerce in which these respective corporations are engaged? I fear we cannot by Federal legislation cure those things that are inherent in the corporations, by reason of State permits.

Mr. OGBURN. You are quite right, Senator. That was our original idea, not so much to try to bring about a wide corporate reform in the laws generally, but to set forth a model incorporation law, among other things, which would require corporations engaged in interstate commerce to conform to certain designated standards which we believe to be constitutional and important. You will observe that among those standards there is no provision for the fixing of hours and wages. However, the basis is laid. Should the Commission which is to be appointed under this law so determine, it could frame a regulation of hours and wages. That is also a highly important question which this Congress or some future Congress is going to be called upon to deal with more adequately than it was dealt with under the N. R. A.

Senator McCARRAN. Your last statement brings up something I want to ask you to dwell upon, if you will, which was in controversy a moment ago. That is the question of regulation which in itself takes the form of law, by which regulations are promulgated by a Commission, as distinguished from statutory enactments. In other words the regulation is a declaration by a delegated power, while the statutory provision referred to proceeds from the lips of Congress, so to speak. Now, we have been confronted on several occasions by Supreme Court decisions dealing with delegated power. It strikes me that the closer we can frame this bill so as to be the direct instrument of the Congress itself, and curtail delegated power, the further we will go toward a law which will stand the test.

Mr. OGBURN. I quite agree with you, the nearer we can come to it.

I had the privilege yesterday afternoon of talking for about an hour with the President on that very question, and I think I may say that he leans not so much to the delegated authority as the statutory enactment. But there are such varying conditions in this country, different from those in your own State and those in my State, that makes it well-nigh impossible for too hard and fast a rule or standard to be fixed which would be flexible enough to meet these conditions. That is one reason why we believe it can oftentimes be done better by collective bargaining, where all these matters can be considered by both sides. That differential of wages now paid in different parts of the United States does constitute one of the most serious problems we have. Many industries are being drawn from the North to the South, attracted by extremely low wages. I have no desire to see the South kept as an agricultural section. The development of the T. V. A. will make it an industrial section, but I have a great incentive to see more adequate wages paid. I recently talked with a New England textile manufacturer who said, “We can better protect ourselves from Japanese textiles than from Mississippi, where wages are low."

There is no way to state a rule for that problem. That is really a Federal problem. The Supreme Court has held in two decisions that neither the Federal Government nor the State of New York can pass laws fixing minimum wages for women and children. We must therefore find constitutional means by which that can be done.

Senator NORRIS. It seems to me it is rather a good illustration of that when we endeavor to meet it by licensing provision rather than a statute.

Mr. OGBURN. I think so.

Senator Norris. If we pass a statute we might run squarely up against the Constitution, which the Supreme Court would hold we could not do.

Mr. OGBURN. Quite right. I think the Congress could set certain standards by which those powers are delegated.

Senator NORRIS. Would there be any doubt about Congress saying to one who applies for a license to engage in interstate business that one of the requirements of that license is that he shall not employ children under a certain age?

Mr. OGBURN. Yes; that is quite right.

Senator NORRIS. And yet, if we pass a law fixing that, we would be conflicting with the opinion of the Supreme Court.

Mr. OGBURN. In Hammer v. Dagenheart?
Senator NORRIS. Yes.
Mr. OGBURN. I distinguish that from this plan.

Senator NORRIS. We could not have any doubt, under the decisions of the Supreme Court now, that Congress has not power sufficient to control the question of child labor; but could it not be controlled by putting it in a license?

Mr. OGBURN. That is my opinion. I think it can.

Senator O’MAHONEY. Is not the distinction that the law which was construed in Hammer v. Dagenheart applied to all persons, irrespective of whether they were natural or corporate persons, whereas this bill proposes to lay down a contractual obligation between the Government and the natural persons who desire to operate in corporate form?

Mr. OGBURN. Yes; that is true.
Senator Austin. Mr. Chairman, I would like to ask a question.
Senator O'MAHONEY. Certainly.

Senator AUSTIN. In that clause there is a recommendation for a minimum wage. I would like to get your theory, Mr. Ogburn. Did you intend by that provision to make it possible for this Commission to adapt its recommendations to the different kinds of enterprises, for example, enterprises engaged in the production of or dealing in perishable goods, as against enterprises engaged in the manufacture and sale of machinery? Was it your idea that this authority would enable the Commission to recommend minimum wages that would differ in different types of trade and commerce!

Mr. OGBURN. Really, Senator, we did not go quite that far. We laid the basis, I think, for a commission ultimately to determine what a fair minimum wage would be, but we have not gone that far in this bill.

Senator Austin. I think there is confusion in the language of the bill in that respect.

Mr. OGBURN. The language of the bill is rather to be a basis for some future development along that line, if it seems necessary. Our view is that all wages, minimum or otherwise, should be fixed by the parties themselves, if possible. If the employees have an organization which is strong enough to deal with the employer and he deals with it, that is about the most flexible method. But in certain industries there are low, sweatshop wages paid which, apparently, cannot be settled in that way; but we believe through this law, or some other, if there is another bill, this problem should be dealt with by Congress, through a Commission, under statutory delegation of power, as nearly as possible to a fixed standard, but still flexible enough to allow the Commission to take varying conditions in different industries into consideration. Conditions in the textile industry may be different from those in the manufacture of high-class machinery.

Senator AUSTIN. I judge from your answer that you would regard that method as a flexible method by contrast with a statute which fixes minimum hours !

Mr. OGBURN. We would be opposed to that kind of a statute without any flexibility.

I suppose the time has arrived when you will have to adjourn?

Senator Van Nuys. Mr. Chairman, is it understood that the memorandum submitted by Mr. Ogburn will be incorporated in the record ?

Senator O'MAHONEY. It will.
Senator VAN NUYS. I think that should be done.

(The memorandum referred to will be printed subsequently in the hearings.)

Senator O'MAHONEY. If there are no further questions, the committee will stand adjourned until 10:30 tomorrow morning, when Mr. Green, president of the American Federation of Labor, will appear.

(Whereupon, at 11:55 a. m., the committee adjourned until the following day, Thursday, Jan. 28, 1937, at 10:30 a. m.)

FEDERAL LICENSING OF CORPORATIONS

FRIDAY, JANUARY 29, 1937

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The subcommittee met at 10:30 a. m., in the Senate Caucus Room, 318 Senate Office Building, Senator O'Mahoney (chairman of the subcommittee) presiding:

Present: Senators O'Mahoney (presiding), King, McCarran, Norris, and Austin.

Senator O’MAHONEY. I should like to say for the record, and for the benefit of those who may be in attendance, that the committee hopes to be able to close these hearings next week. Some persons who have been present at the sessions a little earlier have indicated a desire to appear. I hope if there are any in the room now who want to give testimony, either for or against the bill or for any modification of the bill, that they will indicate their desire to the clerk of the Judiciary Committee, so their names may be given to the committee and they may have an opportunity to be heard.

Senator KING. I suppose there is no purpose to cut off any person who desires to be heard in opposition.

Senator O'MAHONEY. Not at all.
Senator KING. And give them ample time to be heard ?

Senator O'MAHONEY. Certainly. There has been a good deal of propaganda about the bill.

Senator King. I have not heard of any except from the proponents. ponents.

Senator O’MAHONEY. My only purpose is to invite discussion. There will be no disposition to shut anybody off, and it is for the purpose of inviting discussion of the bill that I make this statement.

Senator King. I understood so.

STATEMENT OF WILLIAM GREEN, ESQ., PRESIDENT, AMERICAN

FEDERATION OF LABOR, WASHINGTON, D. C. Senator O’MAHONEY. Mr. Green, will you state your name for the record ?

Mr. GREEN. William Green, president of the American Federation of Labor.

Senator O'MAHONEY. You were invited to make a statement with respect to the bill before this committee, S. 10?

Mr. GREEN. Yes.
Senator O'MAHONEY. Will you be good enough to make it?

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