subject now in hand has therefore no application to localities where the soundness of the doctrine which we have stated is not recognized. Whatever claims of superior efficiency may be advanced in favor of a system of supervision and control of the New York type are offset by the objection of placing the vast interests of stockholders in the keeping, and, as history shows, frequently at the mercy, of public functionaries, who sometimes are but more frequently are not fitted by education or experience for the discharge of the delicate duties of their positions. Nothing stands between the companies and the exercise of the unrestrained action of such officials but the guaranties of the Federal Constitution. But such guaranties only protect against absolute spoliation, and furnish no redress for lesser but almost equally serious injuries which may be inflicted through official action. One great difficulty under systems of undefined public control is the inability or unwillingness of officials to distinguish between the regulation and the operation of corporations. Regulation should stop where operation begins. Matters of business discretion should be left to the decision of those who are responsible for business results. The directors of the affairs of a corporation undoubtedly, in most instances, are better judges of questions of business expediency than outside officials, however enlightened. But it is always the tendency of public bodies clothed with judicial powers or official discretion to enlarge their own jurisdiction, and it is not therefore to be expected that they will set proper limits to their authority. The remedy for this difficulty is to have the obligations of the corporations and the authority of the officials so defined by statute as to make the operation of the provisions of the law upon. the state of facts in hand as nearly as possible automatic, calling for the interference of public officials only to the extent of applying the law to the facts as found. The ascertaining of the facts need not, and usually would not, involve to any considerable extent the exercise of discretionary or judicial functions. In short, under such a system the supervisory officials are in the position of a jury, accepting the law directly from the legislature and merely applying it to the facts as found by them. If the objection is made that such a suggestion needs demon stration of its practicability before it is accepted, the answer is that if the theory is sound it can undoubtedly be worked out in practice, though many details may have to be developed and perfected through experience. But that such a system is practically as well as theoretically sound, is demonstrable through the application of the so-called "Sliding Scale." This, when once adjusted to the case in hand, will automatically settle the great questions of rates and dividends, to the satisfaction of both the private and public interests involved. The settlement of these two important items-one the most important from the public's point of view, and the other the most important from the corporate point of view-will go far toward removing other diffi culties. The question of original capitalization or increase of capital becomes simplified by the adoption of the sliding scale, because any tendency to overcapitalization will be restrained by the fact that the securities of the company can be made valuable only as and to the extent that rates are reduced. So far as this consideration does not operate to keep the capitalization within proper limits, it is a comparatively simple matter for public officials to decide how much capital is required for a given purpose, and to limit the amount accordingly. They should have nothing to say about the reasonableness of the purpose for which it is wanted, or as to the wisdom of the investment; those are business questions, the decision of which should lie exclusively within the province of those responsible for the business results of the enterprise. The business necessity for capital having been thus determined, the function and authority of public officials should be limited to seeing that the purpose of the issue is a lawful purpose, and that a sinister design to secure an undue inflation of capital is not hidden behind an apparently legitimate purpose on the part of the corporation. The matter of compulsory supply and of quality of service, although necessarily involving the exercise of more or less discretion, may nevertheless be so carefully provided for by statute as to render the application of the statutory requirements to the facts presented in any given case comparatively simple and easy. Indeed, the questions involved in proceedings for compulsory service are judicial questions, for which the principles of the common law furnish satisfactory solutions. Those principles, supplemented by whatever statutory additions or changes local conditions may seem to require, will be found to furnish an adequate and complete remedy to any one entitled to a remedy. If it is objected that it would involve an undue burden on the private consumer to compel him to seek a private remedy for an evil which the public should deal with, the objection is met by the suggestion that the public official or board charged with the duty of public regulation and control could be required, upon the complaint or application of private consumers, to institute and prosecute the necessary proceedings to secure judicial action. Even the extension of the territory served by a company and the increase of the availability and adequacy of its service, can be made the subjects of the automatic operation of the theory of the sliding scale. If the company's right to increase of dividends is made to depend, not only on reductions in price, but also upon increase of output-that is, extension of service-it will in its own interests, but with corresponding advantage to the public, seek new customers and encourage more use of its service by present customers. This is entirely possible as a result of a nice application of the theory of the sliding scale, thus removing by one more step the necessity for discretionary regulation and control. So that, all things considered, it is not necessary to admit that an automatic or semi-automatic system of public regulation and control is impracticable. Its advantages, particularly in delivering vested interests from the perils inseparable from the exercise of more or less arbitrary discretionary powers, are so great that every effort should be made to secure its adoption in practice. While the foregoing statement embodies the conclusions to which the studies and consideration of your committee have brought it in dealing with this great question of public supervision and control of public-service corporations, it nevertheless recognizes the fact that not much has heretofore been said along the lines followed in this report, and that public sentiment may not as yet be ripe for the adoption of a system of the character of that advocated herein. While further discussion and experience may be necessary for the education of public sentiment along these lines, it is nevertheless desirable that that plan which will ultimately accomplish the best results should be exploited. If in the meantime legislation is to take the form of regulation and control substantially like that embodied in the New York and Massachusetts laws, we desire to go on record as insisting that the administration of such a system or systems shall be entrusted to men of the highest ability and irreproachable character. So much depends-indeed, everything depends-upon the honesty and wisdom of the men clothed with such powers-capable of accomplishing so much good and of doing so much damage to public as well as to private interests-that every effort should be made to obtain them. To that end we would advocate long terms and secure tenure of office, with adequate salaries, sufficient, as far as possible, to remove the element of self-sacrifice in the acceptance and incumbency of the offices. Inasmuch as in Massachusetts-and perhaps elsewherethese salaries are assessed upon the corporations, our suggestion of ample compensation for such officials indicates our willingness that, if necessary to obtain the best service, the burden of the adoption of this suggestion shall ultimately be put, in whole or in part, upon the companies in interest. An important detail in our opinion is that embodied in the New York law-that the term of only one commissioner shall expire at the same time-thus insuring, except for deaths, resignations or removals, a continuous body of experienced men. We may add that we indulge the hope that, even if the first legislation upon this subject is destined to take the form of non-automatic or discretionary regulation and control, the results of its workings in practice may be the evolution of a highly developed and practicable system of automatic or semi-automatic regulation. We entertain this hope because of our belief in the economic superiority of the one system over the other, and therefore feel justified in believing that ultimately the best will be adopted, even if it is worked out through experience under a less desirable one. The studies, rulings and declarations of principles by competent commissions should ultimately develop such methods of adjustment of the parallel interests of consumers and corporations as may then be embodied in legislation, operating directly upon the subjects of it, without the necessity of the intervention of officials clothed with a large discretion in its application. In concluding their report your committee desire to acknowledge their own appreciation of the inadequacy of their work as compared to the possibilities which existing conditions suggest. They have not, however, felt that it was desirable to attempt more than to do as much pioneer work as possible for their successors, by indicating the general principles in accordance with which this work can be best continued. We believe that the work of the committee is a great work, and should be continued from year to year with all the zeal and wisdom which can be brought to bear upon it. Entertaining as they do the thorough conviction that the interests of the public-service corporations of the country and of the communities which they serve are in truth and in fact identical, they believe these interests will ultimately be shown and acknowledged to be identical. The energies of this committee and of this association should be bent toward bringing about such relations between the public and private interests involved as will demon strate the soundness of the conclusion above stated. Respectfully submitted, EVERETT W. BURDETT, Chairman, ALEX DOW, CHARLES L. EDGAR, Committee SAMUEL INSULL, J. W. Lieb, Jr., JOSEPH B. MCCALL, W. H. GARDINER, Secretary. |