BUSINESS SCHOOL RECEIVES $90,000 FROM UTILITIES

The following article written by Thomas O'Connor is a general resume of the Harvard Business School's connection with Public Utilities. Mr. O'Connor has studied the question for the past few years and has been active as a newspaper correspondent at the State House at Boston for as long a period. In the most recent aspects of the situation Mr. O'Connor is well fitted to deal with the question due to the fact that he was consulted by those men proposing the pending resolution calling for an investigation.

The relations between the Harvard Graduate School of Business Administration and the electric light and power industry are among the matters for investigation under the resolution pending before the Joint Rules committee of the Massachusetts Legislature and coming up for hearing again today. The resolution, calling for an investigation by a special committee of the Legislature into various phases of the light and power industry, was filed by Representative James E. Hagan of Somerville, on petition of Daniel P. Leahy, a member of the city council of Cambridge.

Harvard Not Mentioned

Although the resolution does not specifically name Harvard, Representative Hagan, in his speech before the committee a week ago, made certain references to the relations which he claimed existed between the Harvard Business School and the National Electric Light. Association, as disclosed in an investigation last year by the Federal Trade Commission into the propaganda, activities of public utilities. It is the purpose of this article to sketch the background of that investigation and to indicate some of its disclosures.

The agitation for a Federal investigation of public utilities and particularly of the electric light and power industry, was begun in the United States Senate in December 1927 by Senator

Thomas J. Walsh of Montana, who represented a resolution for a sweeping investigation by a special committee of the United States Senate. Senator Walsh revealed that his attention was drawn to the subject by the writings of Professor William Z. Ripley, of Harvard University, in his book, "Main Street and Wall Street." Professor Ripley had paid considerable attention to public utilities, the merger of power companies, the pyramiding of holding companies and their financial practices, and the growth of interstate power; and raised the question whether the time had not come for Federal regulation of the electrical industry, so rapidly assuming an interstate character.

Investigation Opposed

The resolution of Senator Walsh calling for a special investigation, was opposed by the organized light and power interests, specifically the National Electric Light Association, the American Gas Association, and the joint Committee of the National Utility Associations. They were joined, among others, by banking associations. A spokesman for one of these associations, Henry R. Hayes, President of the Investment Bankers Association of America, appeared before the committee on Interstate Commerce, on January 17, 1928. He argued, among other things, that there was no problem of interstate transmission of electricity to be investigated. He said, "Based on the study made by the School of Business Administration of Harvard University, it would seem that the interstate traffic in the sale of Kilowatt hours amounts to only 9.06 per cent out of the total output in this country."

This was the first reference to the Harvard Business School in the course of the investigation.

Report Limited

The report of the Harvard Business School was limited to interstate transmission of electrical energy in 1926 no comparison was made with any previous period; and no indication was given that the whole trend of the electrical industry, as shown by Professor Ripley and by reports of the Federal Trade Commisson itself, is in the direction of interstate transmission.

Power Interests Use Report

The report was used by the power interests to support their claim that there is little or no interstate transmission of electricity and therefore no Federal problem, calling for Federal investigation and regulation. The report fitted so happily with the tactics of the power interests that there were queries later as to the origin of the study and the explanation of its peculiar limitations. In a Foreword the report states. "In making this study the Bureau had the complete co-operation of the National Electric Light Association... The costs incurred in conducting the survey were defrayed by the Association."

Investigation Confined

The Federal Trade Commission's investigation, which was the outcome of the Walsh resolution, was the confined, in its opening phase, to the so-called public relations and educational activities of the public utilities, especially the National Electric Light Association. The investigation developed the fact that a systematic, nation-wide organization, termed by its critics a "propaganda machine", was operated by the light and power interests to influence public sentiment through the press and the schools and colleges.

The investigation disclosed that the New England Bureau of Public Service Information, maintained by gas, electric and other utilities, and located in Boston, sent out in one year propaganda to 289 schools in New England. The literature bore the slogan. "For use of school students, English, current topics, and debating classes." Since the investigation this slogan has been removed.

How was this paid for? According to evidence submitted to the Federal Trade Commisson. Mr. Aylesworth, managing director of the National Electric Light Association, said at a convention in Birmingham, "Don't be