Congressional record
United States. Congress
Trtvt/iirt/yfti OK IfiVO ^ m» ^ /\m e\ T<'«»->mmkTOT/-MkTC r\T! ■ovx.K K'O'VC <w«r 926 PROFITS AND PRODUCnVlTY ES- SENTIAL TO A FREE ECONOMY Hon. John E. "Jack" Cnnninyluni or WASHINGTON IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25. 1978 Mr. CUNNINGHAM. Mr. Speaker, when we look at corporate profits, we are looking not only at large International companies but at the small business with just a few employees. All businesses are a reflection of their employees. Their growth, successes, or failures depend on contributions of individual workers and management. In many large companies, the pension plans of most working people are intricately tied to the viability of their own company. It is we the people who own American businesses today. And it is for that rea- son that profits and productivity in the private sector need to be preserved. Recently, I was sent an excellent arti- cle on the role of profits by Dr. Ansel McDowell of Lake Jackson. Tex. It speaks of the experiences of one company, but its observations are as true for the mom- and-pop operation as for our Nation's largest firm. I recommend the comments of Herbert H. Lyon, which appeared in the Octo- ber 28. 1977. edition of Dow Today, to our Nation's policymakers as well as those concerned with the vital role played by the American worker in oiu: free enterprise economy: COMMXNTB or MR. HnSMT H. LTON The other day I ran acroM some Instruc- tions that Herbert Dow wrote out for the company superrlaors of another day. They were Issued In an April 1918 letter, at the time the working schedule at the Midland plant was being reduced from 10 hours per day to nine. I think they are both amusing and Instructive. DOW MANAOUCXNT, CISCA 191S In part, Dow's letter reads: "We fully believe that by strict attention to duty on the part of every man. and by Intelligent and more careful supervision on your part, it U possible to turn out as much or more work in nine hours than has here- tofore been done In our plant In 10. Con- sequently, the company wUl not be losing money by making this move . .. "Realizing that the success of this move- ment depends prlmarUy on you as the heads of your Individual crews, we wish to place a few suggestions before you for your guidance and what we think we wUl be for the good of the plant as a whole. "We ask you to get squarely behind this new schedule and see that It (s strictly ob- served. Be on the Job at 7 a.m. yourself at least two-thirds of the time — 20 out of 30 times a month . . . Personally see that every- thing starts with a vim right after the start- tog whistle blows. Do the same thing at 12:30 p.m. Do not make a habit of going home early for lunch, nor of leaving the plant promptly or before 6 p.m. "SUy In the plant and right among your men at these times at least 20 out of 30 Umes a month. See that they are working right up to the time the whistle blows ..." It may not seem to you that requiring supervtoors to be present at the startUig whistle only 20 times out of 30 amounted to very much. However, you have to i«mMnber EXTENSIONS OF REMARKS that supervisors spent many evenings at the plant working on some problem or other, and Herbert Dow knew this. "In view of the fact that you have to be In the plant at odd hotus to look after break- downs, etc.," Dow's letter says, "you are not expected to observe this schedule In Its en- tirety. Neither do we expect you to be regular In the occasions on which you depart from the schedule. "That Is, do not come down every morning at 8 or 9 a.m., although It Is permissible to do so when the occasion warrants It. Do not come toto the plant habitually a few mlmutes late. If you must be late, make It good and late. "Do not make a habit of going home a few minutes early at noon or night, although you may do so occasdonally. WbUe you may take an afternoon to attend to personal affairs once In a while, do not pick on any one after- noon and so let it become known that you will not be In the plant that afternoon. "To sum up, do not become regular In your Irregularities. Keep your men guessing as to whether you will be absent or right an the Job morning, noon or night. "For the good of the plant as a whole, we want the men to know that you are observing the same hours as they are the biggest part of the time, and we do not want them to know when you are likely not to be on hand." A good deal has changed In the last 60 years, but Herbert Dow's advice Is still com- pletely sound In Its numagerlal approach and phUosophy. We learn several lessons from this letter. One Is that Dow managers must set an ex- ample for other employees. Another Is that high productivity Is a key element of success. Still another Is that these Ingredients are necessary and Important because they are prerequisites for a profitable operation. It also Is significant what Herbert Dow did not say in this letter. He did not say, "we're moving from a 10 hour workday to a nine hour day, so we're going to hire more people to make up the difference." The phUoeophy of a lean and highly productive work force was part of the basic Dow Chemical makeup even back then. THS VNTASHtONABLX NXCKSSrTT There Is one special aspect of Herbert Dow's philosophy that I'd like to discuss with you, and that is his emphasis on mak- ing money. You will notice that one of his very first concerns In shortening the workday from 10 hours to nine, and the reason for writing these Instructions to the supervisors, was that "the company will not be losing money by maktog this move." I'm sure we all are quite aware of the long tradition of profit Improvement In this com- pany. It Is a tradition that has continued from one chief executive to the next and It continues today, as strong as ever, with Zol- tan Merszel. Profits seem to have become unfashion- able. They are not perceived by many people In government and university life as being very necessary. If the federal government can operate with an annual deficit of •76 billion, aa our frlenda In Washington have been doing lately, why should anyone In any organization be con- cerned about working at an actual profit? Deficit operation becomes a kind of mind- set. So, 1 want to talk to you about whether Dow's profits are too high. For that matter, why do we need any profit at all? I'm sure that as supervisors, you at least occasionally hear question* such as, "Why does Dow al- ways worry so much about profits?" FANTAST . . . AND PACT About 196JS, a public opinion poll was taken In which people were asked how much January 25, 1978 profit the average n.S.A. company makes on a dollar of sales. The average of the answers came out at 28 percent, and the public said that was en- tirely too high. They were asked what they thought a reasonable bottom-ltoe. after-tax profit should be, and they said about 10 cents on the dollar would be reasonable. At that time, corporate profit margins were actually averaging between four and five percent. In the dozen years since that poll* many companies have undertaken educational campaigns and advertising in newspapers and television designed to let people know that business profits are not as high as they might think. However, when the poll was repeated in 1975, results showed that 10 years of educa- tion and advertising efforts weren't too suc- cessful. That time around, the public said they thought the average company makes 33 cents on the dollar. But they stUl thought 10 cents on the dollar was where It ought to be. The fact of the matter, of course. Is that over the last 20 years the margto of the average U.S.A. company has never been higher than 5.6 cents on the dollar, and the 20-year average has been 4.3 cents. Over these years Dow, In contrast, has done significantly better than the average, as I'm sure we all know. We are not satisfied to be a merely average company, and I hope we never will be. Dow's profits In 1976 amounted to 10.8 cents on the dollar, and that Is Just about where the general public feels a good com- pany should be. If we look at Dow earnings over the last 50 years, we went from (1 million in 1926 to $612.8 mUllon last year — a 50-year com- pounded growth rate of 13.7 percent. I don't think anyone would argue with a statement that that's a sensational record of profit Im- provement. It Is also the true measiure of Dow's success as a company. WHERE DO THBT OO? But to understand whether profits are too high or too low, I think we have to under- stand what they are used for. Who gets them? Where do they go? I think you know that a large chunk of what remains after the government takes out Its taxes Is returned to the shareholden of Dow stock, and this Includes a large par* centage of Dow employees. The rest of the profit Is plowed back Into the company In the form of new plants, ex- panded plants, and modern equipment. New and modern plants and equipment make for a higher rate of productivity, and this helpe to hold down Inflation. We all know that It Is profits which enable us to generate new and better-paying Jobs. It Is a strange quirk that many people on the contrary, believe profits mean fewer Jobs, they reason that high profits mean a company could afford more people on the payroll. The reverse actually Is true. A company needs profits to provide Jobs because It take* many millions of dollars to provide the plant and equipment that make <obfl. It would be short-sighted and self-de- feating to spend our earnings simply to put more people on the payroll without plant and equipment to back them up. These would be short term or marginal Jobs — not the soundly based Jobs and long term growth we seek. The only way to provide sound; long term Jobs is Investment; and Invest- ment can only come In the long term from profits. We in Dow are constantly walking a tight- rope in this sense. We try to keep the work force lean, so we can produce more efficiently and cheaply, stay ahead of our competition and generate profits. As we do this, we g«n- January 25, 1978 erate more, soimder and better paying Jobe for Dow people; but it's the indirect, rather than the direct, thrust of owr program. There is a lot of Individual satisfaction and happiness tied In with doing this. We have worked hard and successfully to avoid layoffs, and to avoid sudden ups and downs In our payrolls. I beUeve Dow people are happier and more enthustestlc about work- ing for the company as a result of these concerns. Dow people don't operate In an atmosphere of gloom and doom, even when the company has tough gotog, as we have lately. There Is complete confidence by our people, I believe, that we will come through the current time of testing as we have come through others, and that the company will continue to grow and prosper. I think Dow people are doing a great Job today under rather adverse conditions, and we should congratulate them on the way they are performing In the face of many discouraging factors — a soggy economy, creeping Inflation, rising ta^, and other negatives. We have good people. Tliey like a challenge, and they like to respond to It. NO PROnr ... NO RESEARCH There is one other vital thnist of the profit system that supports and buttresses all the other benefits: it provides us the funds to conduct oiv research programs. No profit, no research. It's as simple as that. And If . we didn't have research we wouldn't and couldn't develop new products, and we'd stop growing right there. We'd be- come a static or even declining company. In- stead of a healthy, growing one. You read In the newspapers about how the profits (meaning profit dollars) of big com- panies have grown by leaps and bounds In recent years. These figures are highly mis- leading becavise of the impact of Inflatlon- Por example, the total profits of manufac- turing concerns In the U.S.A. In 1966 were $38.2 billion. By 1974 they had zoomed up to $64.5 billion, and that seems like a whop- ping increase. But If you take out the inflation, and use replacement cost rather than original cost, you flnd that the 1974 profits of these firms were really only $18.1 billion — an actual de- cline of about 60 percent from the proflt level of 1965. Looking at It a different way, the after- tax profits of U.S.A. manufacturing concerns, from 1960 to 1970 averaged flve percent of sales. And, contrary to the reports, from 1970 to 1974 they averaged even less — 4.4 percent. So a very good case can be made that cor- porate profits have been declining, even while they may appear at first glance to be going up. This Is a matter of great concern to most managements these days. "WE NEVER STOP BXTILDINa" Let's go now to the specific case of Dow. As you know, we have continued a very heavy rate of spending for new plant in recent years, even though much of the cbemlcad In- dustry stopped building. We now are spending more than $1 billion per year. As a result, we have an inventory of cheaper capacity for later years, when de- mand begins to mushroom again. This is when the competition will have to build new capacity with more expensive dollars. You may remember former Dow board chairman Earl Bennett's comment that "we build In the good years to keep up with demand, and we build In the lean years to get ready for the good years; so we never stop building." The U.S.A. Government is estimating that industry will need to invest $4 to $4.6 triUlon over the next 10 years to keep pace with the demands on It. That obviously Is an enormous amount of CXXIV 68— Part 1 EXTENSIONS OF REMARKS money. It Is triple the amount UJS.A. todus- try as a whole has Invested In the past 10 years. To sustain such a rate of Investment In new facilities means business In general will need much higher proflt levels than have prevailed In recent years. What Is true for U.S.A. Industry In general Is even more specifically true for Dow — we are going to require even higher profits In the years ahead. Our capital spending at a bllllon-dollar annual rate Is not Just somelihlng we'll be doing for a year or two or three until we get our current building program completed. Bather, It Is a steady rate of growth that we consider optimum for our times and our needs. It will not stop or slow because the op- portunities for Dow are not about to nin out. In fact, we constantly have a much longer list of good opportunities than we currently can handle. Our spending rate will un- doubtedly rise over the years In a long term upward trend. NEEDS AND DEMANDS OF 120,000 We must consider also the needs and de- mands of our approximately 120,000 share- holders. We have a proud record of having paid dividends since 1911 without ever having reduced them — and we are the only indus- trial company that can make that claim. We have increased our dividend every year for the past 18, and we'd certainly like to con- tinue that record — In fact, I'm sure our shareholders expect us to continue It. We can maintain and expand upon these records only If our profits continue to grow. Otherwise we will have big problems In meet- ing our conunltments— commitments to the continued growth of our dividends, growth In Jobs and Job security, growth in our con- tribution to a growing society. Your theme at this meettog, the free en- terprise system, is a good and timely topic and one that is vital to the management of our company. The core concept of free enter- prise Is the proflt motive, and the proflt mo- tive is equally the core concept of The Dow Chemical Company. Times wUl change, and wUl bring with them a wide variety of new things, new ideas, and startling new ways of doing things. But one thing. I predict, that will never change at Dow Is our love affair with the proflt motive. It makes possible everything else we do at and through Dow. When it is misunderstood, we should be able to explain It. When It Is allowed to languish, we should help to revise It. When It Is attacked, we should defend It. Dow people should In all cases be prom- inent admirers of the proflt motive. I hope we always will be. 927 it can't, (b) they cant and dent, and (c) essentially all ships at sea would. SPI-^A BAD IDEA THE B-1 BOMBER HON. BOB CARR OF MICHIGAN IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25, 1978 Mr. CARR. Mr. Speaker, 2 days ago Congressman Matthew Rdjaldo inserted a letter to the editor regarding the B-1 which stated, among other things, that (a) the B-1 files supersonic at low alti- tude, (b) Soviet killer submarines are at all times following our missile subma- rines, and (c) very few Polaris sub- marines would survive a Soviet attack. I don't intend to make a big deal out of it, but just to set the record straight, (a) HON. JOHN M. ASHBROOK OF OHIO IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25, 1978 Mr. ASHBROOK. Mr. Speaker, I have come to expect that all too often Federal bureaucrats come up with bad ideas. One of the worst ideas I have heard in some time, however, is that proposed by Sec- retary of Commerce Juanita Kreps. Secretary Kreps has announced her intention to issue a periodical report called the corporate social performance index. As the name implies, the SPI would rate corporations on their "social performance." In the words of Secretary Kreps: By assisting biislnesses in evaluating their own performance, we can help to ensure that corporations get credit for the constructive things they are doing. This Index would also allow those companies who are leaders In promoting the public Interest to bring about an Improvement In the behavior of less pro- gressive firms. The SPI has an incredible potential for abuse. Do we want the Federal Gov- ernment involving itself in a project to rate corporations? And what criteria will be used in determining whether a com- pany is promoting something as nebu- lous as the social good? Can the criteria actually be fair to all? Marvin Stone, writing in the Janu- ary 9 U.S. News & World Report, raises the specter of misuse. According to Stone: Worse sUU Is the possible outcome that occurs to those of us who have Uved long enough to see the confidential Social Se- curity number made pubUc for multiple purposes, FBI flies Invaded and the records of the Internal Revenue Service raided by politicians. Granted the purity of Intent in which the SPI system Is created, may not this Information too. In the future, be turned to new uses? What, In some later decade. Is to prevent It from conversion to a guide when contracts or pimlshments are to be meted out? The SPI is a bad idea. It should be abandoned. Following is the full text of Mr. Stone's article: I Prom U.S. News & World Report. Jan. 9. 19781 A BUREAUCRATIC BRAINSTORM (By Marvin Stone) After a generation of experience with bug- ging, badgering and other forms of interfer- ence by Washington, Americans can be pardoned for being suspicious of any new bureaucratic scheme to gather and publish Information about them. All such proposals should be examined with a critical eye, and that goes for the plan advanced recently by Secretary of Com- merce JuanlU Kreps. She Is setting up a system to Issue a periodical report called the corporate Social Performance Index. Thats SPI for short. Rightly or wrongly, the very name of this enterprise seems calculated to scare the day- 928 EXTENSIONS OF REMARKS January 25. 1978 T .._.. ae -inn/o r-vTCKTCTrkXTC cw uvut kxtja, 9f» 926 PROFITS AND PRODUCnVlTY ES- SENTIAL TO A FREE ECONOMY Hon. John E. "Jack" Cnnninyluni or WASHINGTON IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25. 1978 Mr. CUNNINGHAM. Mr. Speaker, when we look at corporate profits, we are looking not only at large International companies but at the small business with just a few employees. All businesses are a reflection of their employees. Their growth, successes, or failures depend on contributions of individual workers and management. In many large companies, the pension plans of most working people are intricately tied to the viability of their own company. It is we the people who own American businesses today. And it is for that rea- son that profits and productivity in the private sector need to be preserved. Recently, I was sent an excellent arti- cle on the role of profits by Dr. Ansel McDowell of Lake Jackson. Tex. It speaks of the experiences of one company, but its observations are as true for the mom- and-pop operation as for our Nation's largest firm. I recommend the comments of Herbert H. Lyon, which appeared in the Octo- ber 28. 1977. edition of Dow Today, to our Nation's policymakers as well as those concerned with the vital role played by the American worker in oiu: free enterprise economy: COMMXNTB or MR. HnSMT H. LTON The other day I ran acroM some Instruc- tions that Herbert Dow wrote out for the company superrlaors of another day. They were Issued In an April 1918 letter, at the time the working schedule at the Midland plant was being reduced from 10 hours per day to nine. I think they are both amusing and Instructive. DOW MANAOUCXNT, CISCA 191S In part, Dow's letter reads: "We fully believe that by strict attention to duty on the part of every man. and by Intelligent and more careful supervision on your part, it U possible to turn out as much or more work in nine hours than has here- tofore been done In our plant In 10. Con- sequently, the company wUl not be losing money by making this move . .. "Realizing that the success of this move- ment depends prlmarUy on you as the heads of your Individual crews, we wish to place a few suggestions before you for your guidance and what we think we wUl be for the good of the plant as a whole. "We ask you to get squarely behind this new schedule and see that It (s strictly ob- served. Be on the Job at 7 a.m. yourself at least two-thirds of the time — 20 out of 30 times a month . . . Personally see that every- thing starts with a vim right after the start- tog whistle blows. Do the same thing at 12:30 p.m. Do not make a habit of going home early for lunch, nor of leaving the plant promptly or before 6 p.m. "SUy In the plant and right among your men at these times at least 20 out of 30 Umes a month. See that they are working right up to the time the whistle blows ..." It may not seem to you that requiring supervtoors to be present at the startUig whistle only 20 times out of 30 amounted to very much. However, you have to i«mMnber EXTENSIONS OF REMARKS that supervisors spent many evenings at the plant working on some problem or other, and Herbert Dow knew this. "In view of the fact that you have to be In the plant at odd hotus to look after break- downs, etc.," Dow's letter says, "you are not expected to observe this schedule In Its en- tirety. Neither do we expect you to be regular In the occasions on which you depart from the schedule. "That Is, do not come down every morning at 8 or 9 a.m., although It Is permissible to do so when the occasion warrants It. Do not come toto the plant habitually a few mlmutes late. If you must be late, make It good and late. "Do not make a habit of going home a few minutes early at noon or night, although you may do so occasdonally. WbUe you may take an afternoon to attend to personal affairs once In a while, do not pick on any one after- noon and so let it become known that you will not be In the plant that afternoon. "To sum up, do not become regular In your Irregularities. Keep your men guessing as to whether you will be absent or right an the Job morning, noon or night. "For the good of the plant as a whole, we want the men to know that you are observing the same hours as they are the biggest part of the time, and we do not want them to know when you are likely not to be on hand." A good deal has changed In the last 60 years, but Herbert Dow's advice Is still com- pletely sound In Its numagerlal approach and phUosophy. We learn several lessons from this letter. One Is that Dow managers must set an ex- ample for other employees. Another Is that high productivity Is a key element of success. Still another Is that these Ingredients are necessary and Important because they are prerequisites for a profitable operation. It also Is significant what Herbert Dow did not say in this letter. He did not say, "we're moving from a 10 hour workday to a nine hour day, so we're going to hire more people to make up the difference." The phUoeophy of a lean and highly productive work force was part of the basic Dow Chemical makeup even back then. THS VNTASHtONABLX NXCKSSrTT There Is one special aspect of Herbert Dow's philosophy that I'd like to discuss with you, and that is his emphasis on mak- ing money. You will notice that one of his very first concerns In shortening the workday from 10 hours to nine, and the reason for writing these Instructions to the supervisors, was that "the company will not be losing money by maktog this move." I'm sure we all are quite aware of the long tradition of profit Improvement In this com- pany. It Is a tradition that has continued from one chief executive to the next and It continues today, as strong as ever, with Zol- tan Merszel. Profits seem to have become unfashion- able. They are not perceived by many people In government and university life as being very necessary. If the federal government can operate with an annual deficit of •76 billion, aa our frlenda In Washington have been doing lately, why should anyone In any organization be con- cerned about working at an actual profit? Deficit operation becomes a kind of mind- set. So, 1 want to talk to you about whether Dow's profits are too high. For that matter, why do we need any profit at all? I'm sure that as supervisors, you at least occasionally hear question* such as, "Why does Dow al- ways worry so much about profits?" FANTAST . . . AND PACT About 196JS, a public opinion poll was taken In which people were asked how much January 25, 1978 profit the average n.S.A. company makes on a dollar of sales. The average of the answers came out at 28 percent, and the public said that was en- tirely too high. They were asked what they thought a reasonable bottom-ltoe. after-tax profit should be, and they said about 10 cents on the dollar would be reasonable. At that time, corporate profit margins were actually averaging between four and five percent. In the dozen years since that poll* many companies have undertaken educational campaigns and advertising in newspapers and television designed to let people know that business profits are not as high as they might think. However, when the poll was repeated in 1975, results showed that 10 years of educa- tion and advertising efforts weren't too suc- cessful. That time around, the public said they thought the average company makes 33 cents on the dollar. But they stUl thought 10 cents on the dollar was where It ought to be. The fact of the matter, of course. Is that over the last 20 years the margto of the average U.S.A. company has never been higher than 5.6 cents on the dollar, and the 20-year average has been 4.3 cents. Over these years Dow, In contrast, has done significantly better than the average, as I'm sure we all know. We are not satisfied to be a merely average company, and I hope we never will be. Dow's profits In 1976 amounted to 10.8 cents on the dollar, and that Is Just about where the general public feels a good com- pany should be. If we look at Dow earnings over the last 50 years, we went from (1 million in 1926 to $612.8 mUllon last year — a 50-year com- pounded growth rate of 13.7 percent. I don't think anyone would argue with a statement that that's a sensational record of profit Im- provement. It Is also the true measiure of Dow's success as a company. WHERE DO THBT OO? But to understand whether profits are too high or too low, I think we have to under- stand what they are used for. Who gets them? Where do they go? I think you know that a large chunk of what remains after the government takes out Its taxes Is returned to the shareholden of Dow stock, and this Includes a large par* centage of Dow employees. The rest of the profit Is plowed back Into the company In the form of new plants, ex- panded plants, and modern equipment. New and modern plants and equipment make for a higher rate of productivity, and this helpe to hold down Inflation. We all know that It Is profits which enable us to generate new and better-paying Jobs. It Is a strange quirk that many people on the contrary, believe profits mean fewer Jobs, they reason that high profits mean a company could afford more people on the payroll. The reverse actually Is true. A company needs profits to provide Jobs because It take* many millions of dollars to provide the plant and equipment that make <obfl. It would be short-sighted and self-de- feating to spend our earnings simply to put more people on the payroll without plant and equipment to back them up. These would be short term or marginal Jobs — not the soundly based Jobs and long term growth we seek. The only way to provide sound; long term Jobs is Investment; and Invest- ment can only come In the long term from profits. We in Dow are constantly walking a tight- rope in this sense. We try to keep the work force lean, so we can produce more efficiently and cheaply, stay ahead of our competition and generate profits. As we do this, we g«n- January 25, 1978 erate more, soimder and better paying Jobe for Dow people; but it's the indirect, rather than the direct, thrust of owr program. There is a lot of Individual satisfaction and happiness tied In with doing this. We have worked hard and successfully to avoid layoffs, and to avoid sudden ups and downs In our payrolls. I beUeve Dow people are happier and more enthustestlc about work- ing for the company as a result of these concerns. Dow people don't operate In an atmosphere of gloom and doom, even when the company has tough gotog, as we have lately. There Is complete confidence by our people, I believe, that we will come through the current time of testing as we have come through others, and that the company will continue to grow and prosper. I think Dow people are doing a great Job today under rather adverse conditions, and we should congratulate them on the way they are performing In the face of many discouraging factors — a soggy economy, creeping Inflation, rising ta^, and other negatives. We have good people. Tliey like a challenge, and they like to respond to It. NO PROnr ... NO RESEARCH There is one other vital thnist of the profit system that supports and buttresses all the other benefits: it provides us the funds to conduct oiv research programs. No profit, no research. It's as simple as that. And If . we didn't have research we wouldn't and couldn't develop new products, and we'd stop growing right there. We'd be- come a static or even declining company. In- stead of a healthy, growing one. You read In the newspapers about how the profits (meaning profit dollars) of big com- panies have grown by leaps and bounds In recent years. These figures are highly mis- leading becavise of the impact of Inflatlon- Por example, the total profits of manufac- turing concerns In the U.S.A. In 1966 were $38.2 billion. By 1974 they had zoomed up to $64.5 billion, and that seems like a whop- ping increase. But If you take out the inflation, and use replacement cost rather than original cost, you flnd that the 1974 profits of these firms were really only $18.1 billion — an actual de- cline of about 60 percent from the proflt level of 1965. Looking at It a different way, the after- tax profits of U.S.A. manufacturing concerns, from 1960 to 1970 averaged flve percent of sales. And, contrary to the reports, from 1970 to 1974 they averaged even less — 4.4 percent. So a very good case can be made that cor- porate profits have been declining, even while they may appear at first glance to be going up. This Is a matter of great concern to most managements these days. "WE NEVER STOP BXTILDINa" Let's go now to the specific case of Dow. As you know, we have continued a very heavy rate of spending for new plant in recent years, even though much of the cbemlcad In- dustry stopped building. We now are spending more than $1 billion per year. As a result, we have an inventory of cheaper capacity for later years, when de- mand begins to mushroom again. This is when the competition will have to build new capacity with more expensive dollars. You may remember former Dow board chairman Earl Bennett's comment that "we build In the good years to keep up with demand, and we build In the lean years to get ready for the good years; so we never stop building." The U.S.A. Government is estimating that industry will need to invest $4 to $4.6 triUlon over the next 10 years to keep pace with the demands on It. That obviously Is an enormous amount of CXXIV 68— Part 1 EXTENSIONS OF REMARKS money. It Is triple the amount UJS.A. todus- try as a whole has Invested In the past 10 years. To sustain such a rate of Investment In new facilities means business In general will need much higher proflt levels than have prevailed In recent years. What Is true for U.S.A. Industry In general Is even more specifically true for Dow — we are going to require even higher profits In the years ahead. Our capital spending at a bllllon-dollar annual rate Is not Just somelihlng we'll be doing for a year or two or three until we get our current building program completed. Bather, It Is a steady rate of growth that we consider optimum for our times and our needs. It will not stop or slow because the op- portunities for Dow are not about to nin out. In fact, we constantly have a much longer list of good opportunities than we currently can handle. Our spending rate will un- doubtedly rise over the years In a long term upward trend. NEEDS AND DEMANDS OF 120,000 We must consider also the needs and de- mands of our approximately 120,000 share- holders. We have a proud record of having paid dividends since 1911 without ever having reduced them — and we are the only indus- trial company that can make that claim. We have increased our dividend every year for the past 18, and we'd certainly like to con- tinue that record — In fact, I'm sure our shareholders expect us to continue It. We can maintain and expand upon these records only If our profits continue to grow. Otherwise we will have big problems In meet- ing our conunltments— commitments to the continued growth of our dividends, growth In Jobs and Job security, growth in our con- tribution to a growing society. Your theme at this meettog, the free en- terprise system, is a good and timely topic and one that is vital to the management of our company. The core concept of free enter- prise Is the proflt motive, and the proflt mo- tive is equally the core concept of The Dow Chemical Company. Times wUl change, and wUl bring with them a wide variety of new things, new ideas, and startling new ways of doing things. But one thing. I predict, that will never change at Dow Is our love affair with the proflt motive. It makes possible everything else we do at and through Dow. When it is misunderstood, we should be able to explain It. When It Is allowed to languish, we should help to revise It. When It Is attacked, we should defend It. Dow people should In all cases be prom- inent admirers of the proflt motive. I hope we always will be. 927 it can't, (b) they cant and dent, and (c) essentially all ships at sea would. SPI-^A BAD IDEA THE B-1 BOMBER HON. BOB CARR OF MICHIGAN IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25, 1978 Mr. CARR. Mr. Speaker, 2 days ago Congressman Matthew Rdjaldo inserted a letter to the editor regarding the B-1 which stated, among other things, that (a) the B-1 files supersonic at low alti- tude, (b) Soviet killer submarines are at all times following our missile subma- rines, and (c) very few Polaris sub- marines would survive a Soviet attack. I don't intend to make a big deal out of it, but just to set the record straight, (a) HON. JOHN M. ASHBROOK OF OHIO IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25, 1978 Mr. ASHBROOK. Mr. Speaker, I have come to expect that all too often Federal bureaucrats come up with bad ideas. One of the worst ideas I have heard in some time, however, is that proposed by Sec- retary of Commerce Juanita Kreps. Secretary Kreps has announced her intention to issue a periodical report called the corporate social performance index. As the name implies, the SPI would rate corporations on their "social performance." In the words of Secretary Kreps: By assisting biislnesses in evaluating their own performance, we can help to ensure that corporations get credit for the constructive things they are doing. This Index would also allow those companies who are leaders In promoting the public Interest to bring about an Improvement In the behavior of less pro- gressive firms. The SPI has an incredible potential for abuse. Do we want the Federal Gov- ernment involving itself in a project to rate corporations? And what criteria will be used in determining whether a com- pany is promoting something as nebu- lous as the social good? Can the criteria actually be fair to all? Marvin Stone, writing in the Janu- ary 9 U.S. News & World Report, raises the specter of misuse. According to Stone: Worse sUU Is the possible outcome that occurs to those of us who have Uved long enough to see the confidential Social Se- curity number made pubUc for multiple purposes, FBI flies Invaded and the records of the Internal Revenue Service raided by politicians. Granted the purity of Intent in which the SPI system Is created, may not this Information too. In the future, be turned to new uses? What, In some later decade. Is to prevent It from conversion to a guide when contracts or pimlshments are to be meted out? The SPI is a bad idea. It should be abandoned. Following is the full text of Mr. Stone's article: I Prom U.S. News & World Report. Jan. 9. 19781 A BUREAUCRATIC BRAINSTORM (By Marvin Stone) After a generation of experience with bug- ging, badgering and other forms of interfer- ence by Washington, Americans can be pardoned for being suspicious of any new bureaucratic scheme to gather and publish Information about them. All such proposals should be examined with a critical eye, and that goes for the plan advanced recently by Secretary of Com- merce JuanlU Kreps. She Is setting up a system to Issue a periodical report called the corporate Social Performance Index. Thats SPI for short. Rightly or wrongly, the very name of this enterprise seems calculated to scare the day- 928 EXTENSIONS OF REMARKS January 25. 1978 T .._.. ae -inn/o r-vTCKTCTrkXTC cw uvut kxtja, 9f» 928 lights out of buslneaamen. They already are worn out with rlalng social pressures — of oonsumerlsm, egalltarlanlsm and of course envtronmentallsm, accompanied by endless Investigation and form filling. Now, It seems, all of the Isms are to be put Into an Index. And little reassurance comes from Secretary Kreps's langriage: "By assisting businesses In evaluating their own performance, we can help to en- svire that corporations get credit for the con- structive things they are doing. This Index would also allow those companies who are leaders In promoting the public Interest to bring about an Improvement In the behavior d less progressive firms." It may be churlUh to wonder If the Secre- tary can know Just how bad all this SPI-lng sounds. But — to make matters worse — she adds that corporations, by co-operating In the activity, will avoid heavier regulation. To this, one member of Congress retorts: "BlackmaU." To do Kreps Justice, SPI Is part of an effort to carry out a worthy pledge she made on taking office. She said that, despite her busi- ness connections, she would serve all the people. Moreover, when you Interview the bureau- crats assigned to the Index, you find them with only th« best Intentions. To begin, they are working with volunteer business firms In devising "a mechanism companies could use to assess their performance and Its social consequenoes. Both what the Index will look like ultimately and what Is considered fair will depend In part on what the companies come up with." It still may be asked, bow- ever, who will be the final Judge of fairness? Involved will be things like hiring practices, responsiveness to consumers and care for the environment. The resulting set of criteria will be fur- nished to companies that want to evaluate themselves. If they then wish, and only If they wish, they will send back their re- ports to the Commerce Department. We are assured that the Department will not Issue grades or rate companies on their performance, good or bad; will not go out and Investigate, and will not extract infor- mation from other agencies for purposes of the Index. Good principles all. and It Is to be hoped that they will never be abandoned. But the Indexers may "pull together what companies have done and make that available." Obviously companies that have failed to do the things that are Indexed will siiffer by comparison. Bdaybe they should suffer, but then again, maybe they should not. Once more, are the criteria fair to aU7 Worse stUl Is the possible outcome that ooeurs to those of us who have lived long enough to see the confidential Social Secu- rity number made public for multiple pur- poMS, FBI flies Invaded and the reports of the Internal Revenue Service raided bv poli- ticians. Granted tbe purity of Intent In which the SPI system is created, may not fhla information too, in the future, be turned to new uses? What, in some later decade is to prevent it from conversion to a Ruide when contracts or punishments are to be meted out? SPI needs watching. ROBERT D. MURPHY HON. CLEMENT J. ZABLOCKI or wiKONBiir IN THE HOnSB OF BKPBBSSNTATIVES Wednetday. January 25. 1978 Mr. ZABLOCKI. Mr. Speaker, America baa been blessed throughout its history EXTENSIONS OF REMARKS by the services of men of great talent and strength who dedicated their lives to their country. The name of Robert D. Murphy stands high on this list. It was my good fortune for many years to know Bob Murphy as a friend and as a Qovemment oCQcial. On the many occa- sions of our association, I can never recall that he lost his good humor, or his sense of purpose about acc(Hnplishlng the task at hand in the best Interest of the United States. Bob was one of those individuals of great capacity and vigor who would have been a success in any endeavor he chose. One might say that he was a success from the start, having been bom in Milwau- kee. He surely would have been a success in private practice as a promising young lawyer. But fortunately for us all, he chose to serve his country in the Diplo- matic Service and rose through career ranks to become one of our most distin- guished Ambassadors in a crucial period in international affairs. Murphy is Justly famed for his skillful role in World War II as a "diplomat among warriors", which helped to save lives and advance the Allied cause as our Armed Forces moved forward. He de- serves further credit for his firmness dur- ing the difficult postwar days of Soviet pressures against West Germany, and for his outstanding performance In various other assignments. It is but natiu^ that successive Presidents should have turned to him for advice and special undertak- ings over the years. It was my privilege to have worked many hours with Bob on one of his post- retirement tasks, as a member of the Commission on the Organization of the Government for the Conduct of Foreign Policy, which he headed. Another of his recent Presidentlally appointed assign- ments which he performed with distinc- tion was that of chairing the Board of Intelligence Oversight at a time of na- tional reassessment of our foreign intel- ligence system. We grieve at Bob Murphy's passing. We have gratitude for all he has done. January 25, 1978 LOCALLY DEVELOPED EDUCA- TIONAL PROGRAM HON. JOHN J. RHODES or ASIZONA IN THE HOUSE OP REPRESENTATIVES Wednesday, January 25. 1978 Mr. RHODES. Mr. Speaker, the U.S. Office of Education has annoimced an Innovative education project in Arizona schools which merits the attention of my colleagues in the House. For the benefit of the Members of Congress and those interested in educational programs. I am pleased to insert the text of the press release at this point in the Ricord: PIKBS RXLCASX, JANUAST 1978 (This article describes one of many locally developed education programs recognised as successful by the VB. Office of Education. A more detaUed story may be obUlned by visit- ing the project.) It la often said that variety is the spice of life. In Ari»m», an Innovative education project caUed ACIL Is providing variety for both teachers and students. ACIL stands for Arizona Consortium for Individualized Learning. Its techniques are used in 69 elementary schools around the State — schools in suburban, rural, or Inner city locations; schools serving Indians, Chi- canos, blacks, and Anglos. In fact, much ot ACIL's appeal Is that it can be taUored to meet local needs whatever they may be. 