Energy companies ownership comes under new scrutiny
A controversial study of alleged concentration of ownership in the $500 billion-plus US energy industry is expected to lead to new calls in Congress for greater federal scrutiny and control over energy companies.
The detailed 216-page report -- released June 27 by the New York-based Corporate Data Exchange Inc. (CDE), a nonprofit research group -- examines the 142 largest US energy companies whose combined revenues exceed $517 billion. The study concludes that some 50 "investors" -- essentially institutional investors -- control at least 15 percent of the stock of each of the top 38 energy firms.
The result, as the CDE interprets the data, is that these 50 institutional investors -- such as pension funds and bank trust departments -- "dominate" the nation's largest energy firms.
By their large scale "allocation of capital" in energy firms, institutional investors make it "impossible to engage in a national debate" over what type of energy policy the US should have, as well as "developing alternative energy sources," argues Michael Locker, a codirector of the CDE.
Mr. Locker, who has taught at Brooklyn College (his background is sociology), maintains that the CDE study pinpoints an "enormous concentration" of ownership and institutional linkage between major US energy firms.
Some energy specialists, however, argue that the type of analysis used by the CDE, is "simplistic."
For one thing, says Alvin D. Silber, an energy analyst specializing in oil firms with Dean Witter Reynolds Inc. in New York, merely having ownership of a large percentage of shares in an oil company does not necessarily mean management control.
"The management of large oil companies are pretty tough individuals," maintains Mr. Silber. In judging whether an institutional investor controls a firm through its equity holdings, he says, one has to weigh many factors, starting with the long-range history of the firm. In some cases, he points out, a family with relatively small equity holdings actually controls a firm.
Among key findings of the CDE:
* In 53 of the 131 publicly held energy firms studied, at least one stockholder "controls" 5 percent or more the firms overall shares.
* The study questions several instances of cross-energy ownership, which may suggest violations of anti-trust laws. CDE, for example, notes that Newmont Mining holds 3 percent of Conoco, the nation's second largest coal company, as well as 27.5 percent of Peabody Holding Company, the largest US coal firm.
The result, argues the CDE study, is to give Newmont Mining an important industry position in 17 percent of total US coal production.
* The study pinpoints a lot of "revolving door" movement by top officials between energy firms and the federal government. Among persons noted are former Treasury Secretary William E. Simon, former Energy Secretary James Schlesinger, former Secretary of State William P. Rogers, and former Federal Energy Administrator Frank Zarb.
Mr. Locker point to one pension fund as illustrating how large-scale energy holdings by institutional investors may be "inhibiting a public debate" on US energy policy.
The TIAA-CREF -- the university professors and teachers retirement program -- represents over 600,000 individuals. TIAA-CREF, Mr. Locker notes, has reached policy positions on such issues as occupational health standards and investments in South Africa.
But the pension group has remained silent on energy issues.
Yet, in March 1979 alone, the CDE notes, the TIAA-CREF portfolio included 52 energy firms. In some 42 energy firms the plan's holdings were among the top 10 stockholders. Among such major firms as Gulf, Conoco, Shell, and Texaco, the plan was among the top 5 stockholders.
One official of the New York Stock Exchange, while not wishing to comment directly on the CDE study, notes that pension fund (institutional) investment in energy firms should not "really be surprising," since the firms have been among the most profitable US companies during recent years.
Moreover, as some analysts here note, Congress, through statutes setting up a national private pension policy, has in effect invited institutional investors to seek the best possible return within the stock market, such as by investing in energy firms. According to one energy company analyst, "institutional investors" try to screen out those firms that are unprofitable. In effect, he notes, that is a "public vote" - i.e., a vote representing thousands of investors - in energy firms, and hence, energy sources, such as oil, or nuclear power, that show signs clear evidence of marketplace success.
Whatever, some liberal public officials, such as Rep. Toby Moffett (D) of Connecticut, and William Winpisinger, president of the International Association of Machinists, maintain that the new CDE study suggests a high degree of questionable concentration of power within the US energy industry.