PERIODIC REPORTS BY INDUSTRIAL GROUPS AS SOURCES OF INTELLIGENCE INFORMATION

Created: 4/1/1958

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APPROVED FOR RELEASE 1W4 CIA HISTORICAL REVIEW PROGRAM

TITLE: Periodic Reports By Industrial Groups As Sources of Intelligence Information

AUTHOR: Charles H. Helsper

VOLUMB: 2 ISSUE: Spring

STUDIES IN

INTELLIGENCE

A collection ot articles on the historical, operational, doctrinal, and theoretical aspects ol intelligence.

All staicmcnts of fact, opinion or analysis expressed in Studies in Intelligence are those of

the authors They do not necessarily reflect official positions or views of the Central Intelligence Agency or any other US Government entity, past or present. Nothing in the contents should be construed as asserting or implying US Government endorsement of an article's factual statements and interpretations.

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PERIODIC REPORTS BY TJ4DUSTR1AL GROUPS AS SOURCES OF EvTELLIGENCE INFORMATION Charles H. Helsper

The major part ol the world's economic and Industrialis conducted by corporations, combines, associations, and other industrial-commercial groups whichorporate Identity, engage In corporate action, and pursue corporateThese identities, actions, and objectives are in opEre-gate decisive for the course of the free economies and not wlth-out influence In the controlled ones. Yet the intelligence com-munity, for all the enormous effort It devotes to acquiring economic data, has not addressed itself to the systematic study of Industry at the corporate level

The basic source fortudy Is provided by the periodic reports of the corporate bodies themselves. Their ownabout what they have done, are doing, and aim to do may need correction from other sources, but constitute at least the starting-point for this fundament of economic Intelligence.

The corporate report has become increasingly reliable inyears. There are many Influences, Industrial andwhich provide Incentive for truthfuleans for transmitting Information to tbefar-flung management of an organization, thereport has wide acceptance in financial and industrial controln the field of stock corporations the spread of ownership has required management to utilize the annual reportechanism for communicating with stockholders who now participate more actively than ever before In de-tenmning the course of the corporateanagement has found it necessary to explain Its actions in detail.'

Paul Douglai. Commurdcatton Throughoclcwood CWta, K. J.. SIS,

'Reporting to Employees and Public on Profits end Productivity American Management Aaaoclsuon. Hew York,ivtog Stockholder* Theirusiness Week,

Periodic Reports By Industrial Groups

The supervision of securities markets has also contributed to increased fidelity in corporate reports. They are^now scrutl-ruzed in all major financial and Industrial centers.Investment and banking houses are among the many powerful interests urging further Improvement In their

What kind of Information Is contained in foreign corporate reports? They lack uniformity both as to subjects and as to wealth of detail, but do in aggregateide range of data; and their very omissions are often Indicatory. Some of the things they cover are listed below.

Tic-Ins: The name of the corporate body itself, the names of associated Industrial and economic leaders, and those ofand affiliates reveal Inter-group tie-ins. Similarly data on contract relationships and stock ownership.

Production Statistics: Authentic plant statistics which could otherwise be obtained only by covert collection are oftenhere. Expected production goals may Indicateindustrial shifts long before they become evident in trade Journal articles. Production figures on the corporate level are frequently more revealing than consolidated national statistics.

Financial Data: Corporate reports are among the very best sources for all types of financial information. Changes of ownership, bank loans, and financial dictation and control are often revealed in the explanation of financial developments. Reports of top holding companies which Include details onand affiliates In their consolidated financial statements may be the only source of Information on these subsidiaries and affiliates. The report mayinancially weakone ripe for Communist bloc penetration.

Area Development: Reports from the extractive industries often provide information on new discoveries and strikes of strategic and critical materials, data ordinarily difficult toCorporate determination to exploit or not to exploit discoveries and the reasons therefor may sometimes be

Labor: Corporate reports reveal the relationship of owners, managers and controllers of capital to industrial labor, one of the most Important aspects of modern Industry. As the col-

Periodic Reports By Industrial Groups

lectlve opinion of the leaders of Industry these reports have greater weight than the attitudes expressed by individual

Production Methods: Tbe Inauguration or development of new production methods often determines the major trends and movements In an industrial field. Corporate reports often comment on new methods which show promise, and thusinsight into the confidential area of industrial know-how.

Markings: Industrial and commodity msxkings arem use and significance. Corporate reports often provide markings information obtainable by other methods only at great cost.

Plant and Installations: The corporate determination toreplace, or abandon facilities Is revealed, often with full explanation for the action, in corporate reports. Pictures of facilities and details of the structure and capacity of new plant units are sometimes Included. Reported Intra-plantand additions may foreshadow radically new products or production methods based on some scientific break-through.

Trade: Past trading operations are often reviewed and plans and objectives of future marketing policies outlined. Including plans for trade with and in the Iron Curtain areas. Tberesults from such trade are sometimes included in the discussion

General Policy: Some corporate reports set forth the group's policyiversity of subjects. Shipping companies may discuss policy relative to handling Iron Curtain cargoes or their plans for sale of bottoms to Iron Curtain countries.

Corporate reportsource of economic Intelligence have certain other advantages. Although their information is usuallyurrent nature, some of It is relativelytudy of railroad car markings In the Far East made4 found Its best lead to the markings system In the 1M0eport of the Canton and Kowloon Railway.

Another advantage of the reports Is their frequentIn English, because of the predominance of the English-speaking nations in| markets of the world Us.aid programs and VS. capital investment In foreignis broadening the practice of publishing reports to English aa well as In the local language.

Periodic Reports By Industrial Groups

overnment agencies and some private concerns have in past years devoted considerable scattered effort to theof foreign corporate reports, most of It unfortunately in different special fields of interest. The ComprehensiveReporting Program (CERP) of the State Department is the most nearly systematic But tn its country programs, subject to review by many governmental agencies, corporate reports frequently fall by the wayside in the struggle among collection priorities. Its directives to the collectors In many countries contain little or no reference to the need forreports. Some mention the namearticularreport believed to be of value, Implying that no others are wanted. Periodic reviews of CERP program results,frequently include recommendations for more corporate reports.

Military attaches have also collected corporate reports for limited periods and for special purposes, such as militaryprocurement programs. Thereack of continuity and consistency in military programs requiring corporate level data which seriously limits military collection of this type of data.

The Securities and Exchange Commissionopyeportoreign security is placedomestic securities market, and has acquired by thisizable collection. Its usefulness for intelligence purposes Is limited by Its fragmentary nature, by the necessity to keep It within the confines of the Securities and Exchange Reference Room, and by the fact that It is not indexed.

Industrial trade associations and city and state Industrial libraries have shown considerable interest In corporate reports. But their files, located In New Orleans, San Francisco, orare not readily available to the intelligence analyst.be may not know of the existence of reports In these libraries because not all special libraries index them.

Business travelers, both corporate representatives andtourists, sometimes obtain corporate reports fromin which they have an interest These become lodged In private files or corporation libraries and arc unknown and unavailable to the Intelligence community.

Business directory publish era and financial analyticalIn the United States and other English-speaking countries

Periodic Reporti By Industrial Croups

obtain many corporate reports. But their working flics are private property containing much confidential information, and intelligence organizations can secure access to them only by courtesy. Dun fc Bradstreet and McGraw-Hill in New York and Kelly's in London make their publications available, but these are rewritten and hence once removed from theby the originator. Moreover, the explanatory portions of the reports they receive are frequently excluded from themanuals.

The Census Bureau has obtained certain reports in exchange for Census publications. The Export-Import Bank oftencorporate reports in connection with loan applications, and the Department of the Interior obtains reports fromforeign mining, petroleum and other natural resource producers.

This variety of fragmentary collection mechanisms needs to be coordinated and supplemented in order to establish acollection effort to assemble foreign corporate reports of all kinds. Government purposes. Collection costs would be low. Many foreign corporate reports can be obtained free on request. Others can be obtained by subscription from reporting organizations such as McGraw-Hill orrad-street or their European counterparts. The average cost per report should not exceed five or ten dollars.

At the very least those reports now received within theshould be collectedentral file. Researchcould make useentralized economic librarya file of corporate reports, Just as the Military Services Medical Library now serves in its field all three militaryand other government organizations.

It is true that foreign corporate reports are of valuefor intelligence on the free economies. But the interplay of these economies with those behind the Iron Curtainhenomenon of growing magnitude with the growth of the Communist bloc's aid-and-trade program, and corporateand plans in the free world may have much to do with the success or failure of that program As the products of the Soviet Industrial machine begin to Influence conditions on tbe world market, owners and managers in the West, via theof their annual reports, will outline their actions and

Periodic Reports By Industrial Groups

plana to counter these influences; and economic intelligence most take such counteraction into account.

It li not to be excluded, moreover, that the reports ofbodies even In the area of controlled economies,on its fringes, may In time become available and provide deeper Insight or more useful detail of economic intelligence directly on tbe Communist bloc.

An Indexed file of corporate reports should be supplementedompilation of the proceedings of InternationalIn the industrial and scientific fields. Such organlza-lions, uniting private or national groups in pursuit ofvarying from standardization of railroad equipment to preemptive regional marketing agreements, hold meetings where the powerful representatives of Industrial and scientific elements discuss issues and sometimes reach conclusions. Their agreements are items of economic intelligence, theirsometimes even more valuable ones.

At the present time there is no centralized library oforganization reports. It Is one of the needs of the intelligence community. These bodies, in the nature of super-governments, are of such Importance as to Justify regularof all proceedings. The influence and number of these organizations win continue to grow as the world becomesthrough economic interplay and Improvements In all forms of communications and travel. The advent of newlycountries and areas will Increase the scope and power of world associations, and determinations made by newly formed international organizations will profoundly affectIn all fields of Industry and science.

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