The nation's biggest corporations are closely linked by directors who serve on one another's boards of directors or who serve together on the boards of a third company, a massive study released yesterday by the Senate Governmental Affairs Committee concludes.
Among the nation's 130 largest corporations - which control $1 trillion in assets, about a quarter of all corporate holdings - the study found 530 direct interlocks, where a director of one company sat on another's board, and 12,193 indirect interlocks.
The 1,000-page study, which lists the so-called interlocking directorates for each of the 130 companies in the study, said that when directors serve on each others boards or together on another company's board, potential for antitrust abuse exists.
The study contends that concentrating control in a few hands develops the possibility of business power elite and increases the likelihood of "common action . . . and a consequent elimination of competition."
However, the Senate study makes no allegations of any abuses arising from interlocking directorates nor was the study endorsed by the committee, but merely transmitted to all members by its chairman, Sen. Abraham A. Ribicoff (D-Conn.).
The study recommends that any officer or director of a company with $1 billion or more in sales or assets be prohibited "from being an officer or director of any other company of a similar size," whether or not the companies are in the same line of business.
Although the staff study said such a proposal is "harsh," the companies with "the closest directorate ties are the industry leaders with over $1 billion in sales or assets, and it is at this level that the potentials for abuse reach their intensity on a national scale and the impact on corporate policies can be the most severe."
Companies like to have experienced major businessmen as their "outside" directors (those who are not members of a company's management) because these businessmen know how to run large companies and can set policy intelligently for the companies on whose boards they serve.
The study charged that "the interlocking directorate can be both good business for corporations and bad business for the public."
The study, based on 1976 data, found that 123 of the 130 largest companies "connected on average with half of the other major companies in the study." The committee report did not examine interlocks between these companies and a smaller company.
The companies in the study included the 30 largest industrial companies, the 20 biggest banks, the 10 largest life insurance companies, the 10 biggest diversified financial companies, the 20 largest utilities, the 20 largest transportation companies and the 10 largest retailers. The three major broadcasting companies and seven investment advisory companies were also included.
According to the Senate staff study, the major competitors in the fields of automobile manufacturing oil and other energy, telecommunications and retailing "met extensively on boards of America's largest financial institutions, corporate customers and suppliers.
"For instance, in 1976, directors of General Motors interlocked with directors of Chrysler on the boards of (American Telephone & Telegraph), Chase Manhattan, National Detroit Corp. . . . and the New York Stock Exchange.
"General Motors connected with Ford on the boards of Citicorp, J. P. Morgan and Procter & Gamble."
AT&T, the nation's largest corporation, had 31 direct and 625 indirect interlocks that reached 93 of the 130 companies in the study, which contains page after page of computerized printouts of companies, directors and the relationships between them.
The country's biggest energy company, Exxon, "indirectly interlocked with its competitors as follows: Atlantic Richfield (four times), Mobil (six times), Shell (once), Standard of California (six times). Standard of Indiana (twice) and Texaco (twice).
Each of the 13 biggest companies, which control about $400 billion in assets, reached an average of 70 percent of the 130 giant corporations "through a total of 240 direct and 5,547 indirect interlocks." This figure is probably low because the subsidiaries of the 13 firms were not included. The biggest companies were AT&T. BankAmerica, Citicorp, Chase Manhattan, Prudential, Metropolitan Life, Exxon, Manufacturers Hanover, J. P. Morgan, General Motors, Mobil, Texaco and Ford.