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Mr. Cidneg, President of the Federal
Resecue
Banh of Cleueland, gque the f ollowing address
on December /,0, i,95i,, ot the frnal banquet
in the celebrotíon of Western Reserue Unioecsitg's one hundred twentg-frfth anniuersarg
Corporote Support
gear.
for
Colleges ond
Universities
TI
,l_ neEl cREÄTLY HoNoRED to be asked
by President John S. Millis, I. F. Freiberger, and Lewis B. Williams, to speak
on this occasion. My qualifications to fill
this spot seem to me very meager and I
can only gather courage to undertake the
assignment by reminding myself that I
have been in business life long enough
to observe from good vantage points the
part which our colleges and universities
have had in the great economic progress
which we have had during the half century, and that no one could speak on the
subject with a deeper and more sincere
conviction than I.
I began to be very much aware of
national affairs, though still a small boy,
during the 1896 presidential campaign
when William McKinley, an Ohio candidate, won the presidency with a frontporch campaign. That all seems long,
long ago and quite a different day. Life
was simple-not an automobile in our townelectric cars just replacing mule cars-few tele-
phones-low incomes-some hardships-real
- buggy days-good old days-and
h"ppy days but requiring material progress on
horse - and
many fronts to support the nation's growing
population and bring about generally higher
standards of living,
(2) American character, inventiveness,
capacity for hard work, adventuresomeness,
the existence of widespread markets without
trade barriers; yes, all of these.
But adding these to availability of natural resources-we must look for something further
that has made possible the efficient utilization of
these resources of nature and of manpower and
intelligence.
Educstion's Contribution
lo Americo
I do not need to detail the changes which
have come in fifty years. To mention the old
draws attention to the great contrast presented
by the new. The change has been fantastic and
almost beyond belief.
What has made the great changes of the
half century possible for us?
( I ) Natural resources; yes, but other
countries lrave them and have not matched
our progress.
(3) I
believe this is found in the
"know ho\Ãr" which is so outstanding that we give it daily recognition, call upon
it for every task, and are asked to export it to
all parts of the world.
What has given us r\merican "know how"?
Many things-but I believe the essential
contribution has been made through the development of our educational syster¡-elementary,
.A,merican
secondary, and university.
l{t the turn of the century higher education,
long established and of high quality, was coming
agriculture, industry, and commerce, and our
whole way of life which is our pride and the
basis of present well-being. Without a sound
and constantly developing educational system,
we could not have had the improvements in
methods, the occurrence and application of scientifrc discoveries, or the successful handling of
the problems of organization for manufacturing
and distributing goods and services, all of which
taken together have resulted in the scale of our
present-day performance. S/e cannot overstate
the importance of the part which our system of
higher education has played in making possible
the present-day organization which provides the
means of subsistence and the standard of living
which is ours.
as it became more widely available and was sought by young men and women
in constantly increasing numbers. An increasing
number of young folk were finding it possible
to go to college, working their way if family
means were not available. (I was one of these')
,\lso the need for a college education, if one were
to succeed fully in the business of life, was being
into full bloom
more widely recognized. Facilities
for
these
seekers after knowledge were being provided
largely through gifts for college and university
endowments. There were many individuals
gathering wealth who were able and willing
to make such gifts in large amounts and they
helped build firm foundations for the growth
of
privately-endowed colleges and universities.
.,\t the same time land-grant colleges and Statesupported universities were coming to high
No Alternotive
1o
stature.
Itlointenonce ond Development
Educotionol 0pportunity
There is no acceptable alternative to maintaining and developing further the educational
system which is an indispensable part of this
American organization for living. We must find
ways and means of maintaining the flow of funds
to our educational institutions so that they may
live and grow, and we do not want to see this
done by having funds first drawn into the
Federal Treasury by taxation and then doled out
to our colleges and universities by politicallyselected officials, no matter how good they may
be individuallY.
We may liken the problem which \Ã/e must
meet in maintaining our facilities for higher
education to that which arises when action must
be taken by a community to maintain and develop its water supply to meet the growing needs
for domestic consumption, for irrigation, or for
industrial uses. We tend to think of water as a
frce gift of nature as we do of air and light. But
in all ages it has been necessary to make organized
efforts to bring water from where it is available
to the places where it is needed. The fact that I
grew up in a semi-arid region, where we were
always acutely conscious of the dificulties of
bringing enough water to our homes, gardens,
and farms to meet minimum needs, may make
this illustration seem to me more vivid than it
will to you who have lived in this highly-favored
region with adequ ate raínf.all and the water resources of the Great Lakes îear at hand but,
even in Cleveland, the problem of bringing water
from where it is available to where it is needed is
no small one, and throughout the country con-
of the
Recent Post
In my native state (which I modestly admit
to be California) two great institutions wete at
a well-advanced stage of development. Stanford
University was founded through the generous
gifts of Senator Leland Stanford, and the University of California was State supported but also
the recipient of large gifts from many wealthy
individuals. Many of my boyhood friends were
going to these institutions, many of them also
were working their way. The opportunity was
there and the young men and women of the day
were grasping it. What was taking place in
California was matched by what was going on
in other parts of the country and notably in
Ohio.
The feeling which we of my college generation have for our respective colleges and universities is deep gratitude and the desire to make
such contribution as we can to the successful
continuance of these great institutions. We have
had in our country a golden age in education at
the same time that we have had an upsurge in
economic development and we do not want the
educational facilities to be diminished in quantity
or in quality, \Jnfortunately, we now see evidence of changes which threaten the continuance
of the balance of educational opportunity with
educational need.
I believe you will agree that the growth of
our ,\merican system of education has supported
and has been essential to the progress in our
t2l
uses them. Under this doctrine, it has been
possible to make the large expenditures for construction of dams, for storage and for conduits
for water distribution which are today a standard part of our national practice. The most
beneficial use of the water is made possible but
the flow of the streams is greatly changed and to
be assured of an adequate supply of the lifegiving water, it is necessary to have or acquire a
water right giving access to water in the amount
needed, even though that means going through
or around or over mountains.
I think we may draw an analogy between
the flow of a great watercourse and the flow of
the income stream from which our colleges and
universities have been supplied with funds during
past years. Before the adoption and imposition
of the Federal income tax, the income stream
was much like the generously flowing stream for
which the doctrine of úparian rights was appropriate, and income flowed to many along the
stream who could and did tu(n over generous
amounts to educational institutions.
tinuous enlargement and development of waterproducing works has to go on all the time.
My home town of Santa Barbara was in
early days supplied from indívidual home wells,
then by groups of wells operated as a municipal
water system, then a tunnel was run into the
Santa Ynez Mountains. Soon a tunnel through
those mountains and construction of the great
Gibraltar Dam was necessary to store and divert
through the mountain range to Santa Barbara
the waters of the Santa Ynez River, and now
there is in construction a $17,000,000 project
of another dam and a second diversion tunnel
farther down the Santa Ynez River to take in
additional watershed. ,4.11 parts of our country
have such illustrations and will have more as
time passes and population increases. Whenever
new projects are planned the rights of many
parties must be considered and complications
overcome to establish the water rights involved.
Out early law regarding water rightsl was
the common law of England. It had developed
where water was plentiful and where, by the
general law applicable to running streams, every
riparian proprietor had the right to what may
be called the ordinary use of water flowing past
his land, for instance, to the reasonable use of
the water for domestic purposes and for his
cattle, and the further right to use it for any
purpose, provided he did not thereby interfere
with the rights of other proprietors, either above
or below him. He had no right to intercept the
regular flow of the stream, if he thereby interfered with the lawful use of the water by other
Current Toxes
Are Diversion Doms
But many changes have occurred. .Among
them may be noted, as particularly important
for our discussion, the adoption of practices of
taxation which, like diversion weirs in a stream,
draw off income for public uses. ,\t first there
were low weirs and small diversion. ¡\s the tax
has been increased, there has been a heightening
of weirs or a raising of lofty dams comparable
to those now found on the important watercourses of our western states, so that we have the
impounding and drawing off of a major part of
the income stream. The total volume of income
flow has been greatly increased through our
greater productivity but the part flowing down
to the individual in a form which he can control
for such purposes as contributions to educational
institutions is restricted. So if our educational
needs are to be met, and they are just as essential
to our well-being as is the daily supply ol water,
the colleges and universíties must find a way to
participate in the stream of income flow at a
point where the flow has not been reduced to a
trickle by diversion works erected by the tax
laws and other causes. How are they to do this?
Contributions of individuals have been the
great reliance of our púvately-endowed colleges.
Probably, they will continue to be of much
proprietors, and inflicted on them a sensible
injury.
So in England and in the well-watered parts
of the United States, the doctrine was that those
whose lands lay along a stream were entitled to
rely upon the continued flow of the stream "as
it was wont to flow, undiminished in quantity
and unpolluted in quality".
The Doctrine
of
Benefìciol
Use
But in many parts of the United States this
doctrine proved unsuitable and was replaced
gradually by what has been called the "Ärid
Region Doctrine" or the "doctrine of beneficial
use" \¡¡hereby the waters of a stream become the
property of the one who flrst appropriates and
1(1926 Ed. *Encyc. Brit.-p. 385-gy'ater Rigbts-
quotes Lord Kingsdown speaking
ia
1858.)
l3l
I was thrilled a few days ago to read that
the V/achovia Bank and Trust Company, Winston-Salem, North Carolina, had given $100,000
to establish a chafu of banking at the University
of North Carolina. The president of the
Wachovía Bank, Robert M. Hanes, is an outstanding banker and member of a family of
practical people rccognized for their success in
industry and finance. I believe this action should
be taken as evidence of an aïyareness on the part
importance. But we should note that, for an
individual who derives income from corporation
dividends, fifty-two per cent of the earnings in
which he has an interest is first diverted to pay
the normal corporation income tax, and a further amount up to thirty per cent may go for
excess profits tax. The States also tap corporation
income at varying rates such as 8 per cent in
Oregon; 7 per cent in Georgia; 6 per cent in
Minnesota, Mississippi and North Carolina;
V/isconsin, North Dakota, and Kentucky have
graduated taxes with 6 per cent maximum; the
tax is 5l per cent in New York; 5 per cent in
Colorado; and so on through thirty-three States.
In the circumstances thus created, it seems clear
that it will be in the interest of the stockholder
if a corporation in which he owns stock makes
contributions to public causes in which the stockholder is interested. To the extent that educational institutions can obtain contributions in
this way direct from corporations, they will in
effect draw their life-giving funds from points
above the great dams on the stream of income
of these highly-skilled businessmen of the need
for and the propriety of restoring the flow of
funds to our colleges and universities.
I have been much interested to read the
remarks of Irving S. Olds before the Älumni
dinner celebrating the 250th anniversary of Yale
University, at New Haven, on October 19,
195I. His remarks are so exactly in point and
so thoroughly sound that I quote from them:
The ltlutuol Stoke of
Educotion ond Corporotions
"Now speaking as a corporation executive,
although not officially as a representative of the
company with which I am connected, I want to
say emphatically ¡þ¿¡-i¡ my opinion-€very
Ämerican business has a direct obligation to
flow.
I am neither a tax lawyer nor a tax expert
but I understand that under the Internal Revenue
Code2 a corporation may make charitable contributions up to 5 per cent of the corporate taxpayer's net income. In view of the existing rate
of income taxes, I believe that every prosperous
corporation should so appropriate this part of its
income and that a high priority should be given
to contributions to educational institutions.
support the free, independent, privately-endowed
colleges and universities of this country to the
limit of its financial ability and legal authority.
And unless it recognizes and meets this obligation,
I do not believe it is properly protecting the longrange interests of its stockholders, its employees
and its customers.
"Every well-managed corporation, of
course, must preserve, improve and develop the
major sources of its raw materials; but if it is
necessary for us to spend millions of dollars to
beneficiate the ore which goes into our blast
furnaces and to process the coal which goes into
our coke eysns-¡þsn why is it not equally our
business to develop and improve the quality of
the greatest natural resource of all-the human
The Corporotion
ond Privote Philonthropy
It is not many years since corporations felt
obliged to stave off requests for action of this
kind by saying, "'We have no right to give away
our stockholders' money." For national banks,
this ban was removed by an act of Congress and
for Ohio corporations, including banks, therc
was legislation of like wording and like purpose.
Nowadays, corporations are making generous
contributions to community funds, hospital
funds and, in an increasing degree, to educational
institutions. Bulletin ff49 published by National
Industrial Conference Board, Inc., from records
of the Bureau of Internal Revenue showed that
corporate contributions to private philanthropy
increased from about 927,000,000 in 1938 to
over $240,000,000 ín L947.
---;L.tioo
mind?
"To a limited extent, many corporations
doing
that today. They support scientific
are
research by qualifred schools, in various specialized fields. They also make general donations
to certain technical schools from which they
hope to draw trained personnel; .and they contribute extensively to educational projects in
their plant communities where most of the bene-
23q.
t4¡
frts of these expenditures will devolve directly
upon their own employees.
"But their power to contribute is limited
by the statutes of the particular state in which
each of them is incorporated, and many state
laws cast grave doubt upon the right of a
corporation to donate the money of its stockholders unless the probability of immediate and
direct benefit to the donor is clearly demonstrable.
That is why they have not felt frce generally to
finance studies in the liberal arts and the humaníties, even though the most difficult problems
Cleveland before The City Club on Saturday;
Horace .,\lbright, for many years Superintendent
of National Parks and an important aid to the
late Stephen Tyng Mather (also a University of
California man of an earlier class) in the development of the National Park System; Earl W'arren, Governor of California, now a candidate for
presidential nomination, and many, many others.
They received varied training in the University
and they are filling various posts in our complex
business and professional life.
which Ämerican enterprise faces today are neither
scientific nor technical, but lie chiefly in the
realm of what is embraced in a liberal arts
education. That such doubts should be resolved,
either by judicial interpretation or by legislative
amendment, is, I believe, an immediate and major
responsibility of the managers and shareowners
of every corporation which honestly desires to
preserve frce and independent educatión in
America."
"A Greot Universily
ls the Mqrk of o Greot City"
The values which a university gives to its
community are incalculable but enormous. From
Cleveland's Western Reserve University have
come many benefits, associated with such names
as those of Samuel Mather, Liberty E. Holden,
John L. Severance, the Hanna family, the PayneBingham families, the Bolton-Blossom families,
l\ndrew Squire, John Huntington, Francis F.
Prentiss, Commodore Beaumont, and more recently, Mr. and Mrs, John Huntington Hord
and Supreme Court Justice John H. Clarke.
I was particularly pleased when, at the time
of his installation as President of Western ReseÍve University, President Millis emphasized
that Western Reserve is an urban university and
that it will live up to the obligations which that
implies. Now in its 125th year, the University
has, since its establishment, conferred 39,837
degrees. These graduates have provided a large
segment of Cleveland's leadership, professional
men and highly skilled workers throughout these
years. Through its downtown center, Cleveland
College is engaged in the continuing education
of many of those same people, the alumni of
other colleges and other adults. This same center
has provided an opportunity to earn degrees by
part-time study and education in specific areas
of learning to 100,000 citizens of Cleveland in
the past 25 years, the great majority of whom
are employed in Cleveland industry. In addition,
research and staff members through services of
the School of Medicine, the School of Applied
Social Sciences, the School of Dentistry, and
School of Law, the Personnel Research Institute,
the School of Business and the School of Nursing
and other units of the University, are vital in
the progress of this communiry and to the welÍare of its citizens. It has been well said that "a
great university is the mark of a great city".
lrving S. Olds, Alfred P. Sloon,
Beordsley Ruml, Theodore Ge¡ger
In an afticle in the December issue of Fop
tvrLe magazine headed "Should business support
the Colleges?", Mr. Olds' remarks are quoted as
an affirmative answer to a similar comment made
some months ago by Alfred P. Sloan, Chairman
of the Board of General Motors. Reference is
also made to a somewhat different approach in a
pamphlet "The Five Per Cent", prepared by
Beardsley Ruml and Theodore Geiger for the
National Planning llssociation. As they see it,
high taxes actually impose an obligation on
corporations to make contributions to educational
institutions.
l\s Mr. Olds said in his remarks, gifts
should not be limited to scientific or technical
institutions or to those departments of universities. We need the well-rounded educational
programs of progressive and forward-looking
institutions with differing emphasis as to field
of study as we need men of varied equipment
to round out the organization of our great corporations and of our great society. From my
class of I9I2 at the University of California,
which we always claimed was "the greatest class
that ever hit tI.C.", have come such leaders as
James Black, President, Pacific Gas ü Electric
Company; Harold C. Urey, discoverer of heavy
water and Nobel púze winner, who spoke in
t5l
Western Reserve, with its eleven Schools or Colleges,
editorial in the CLrveI-nNo NEws
December 12, 19 5 I
,ín
11,00
use
Corporations Face
of
its act
funds entrusted to it. If we are to face the future
with confidence, we must find a way to maintain
the access of this and other comparable educational institutions to the national income stream,
To do this, I believe we shall have to establish
giving by corporations as a recognized and imþortant meanJ. Thus, we may enable the educational institutions to get their pipes into the
major reservoirs of funds which are behind the
great diversion dams along the stream of income'
Ãnd, thus, we may assure the continuation of
the essential contribution which we have had
from these institutions to make possible the continuance of our economic progress and success.
In legal descriptions of the old California
Ranchos with titles derived from the Spanish
grant, boundaries were often described, with
ielation to watercourses, running or dry, as
"thence following the meanderings of the stream
to a point". The meanderings of mi rather dry
stream of discussion have been intended to lead
to a point which may be stated as follows:
1. That the growth of our great educational system has made possible, and has been
made possible by, the development of our
system of corPorate enterPrise,
2. ^4. major part of the flow of corporate
income is being diverted from its course and
will not continue to flow through the usual
channels to educational institutions.
7, The continued welfare of colleges
and universities calls for the direct flow of
income from the corporations to the educational institutions in the amount permitted
by law.
4. The continued welfare of the corporations themselves and of their stockholders
will best be served if this is accomplished.
That is my belief. I hope that you will
share it. Thank you,
Duty
in, Educatinn,
There is clear common sense in the counsel
Cleveland's leaders that corporations, born of private enterprise and now the
keepers of thaC American tradition, must inv.sl for high dividends in education.
Addressing trustees, workers in Western
Reserve University's development campaign
of two of
for
$6,000,000
in
three years, President
John S. Millis and Ray M. Gidney, President
Reserve Bank here, stated the
for successful business to
need
imperative
chánnel more of its funds into this country's
university and college treasuries'
Mr. Gidney likened the need to a nation's
need for water; successful cities have delivered
watet from outlying sources to freshen the
community's enterprise, Dr. Millis asserted
that a city can advance best if it weds the
private enterprise of economy to. the private
ànterprise of education, religion, human welfare and the arts.
Clevelanders who have a deep-rooted pride
in this city's progress must rccognize the responsibility it entails. V/RU's advancements
hive been many-its new social science building, its improved medical facilities, its Clarke
Fiõt¿, its projected Rose Institute hospital
and its experimentation with television classrooms (an estimated 54,000 are seeing and
learning daily through these programs). .A'nd
these hãve fixed WRU's place in what Dr.
Millis calls "the constellation of University
of the Federal
Llrcle .
The expression, "Great cities have great
universities," might well be paraphrased to
say, "Great corporatíons can keep great colleges," if they support and encourage the development of the greatest natural resource of
all generatio¡s-gþ¿ human mind.
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