Conflict of Interest

Plans for quick confirmation of Dwight Eisenhower's Cabinet appointees seemed to be purring along as smoothly as a 1953 Cadillac; then the engine suddenly began to pound. The noise came from the hearing room of the Senate Armed Services Committee where Secretary of Defense-designate Charles Erwin Wilson was being questioned in closed sessions. He had resigned as president of General Motors, said Wilson, but he still held 39,800 shares of G.M. stock worth approximately $2,500,000, and in the next three years he is to get bonuses, including 1,800 more shares of stock.

There was an uneasy stir in the committee room. Did he intend to sell the stock? No, said Erwin Wilson. If he sold, he would have to pay a big capital-gains tax (estimates ranged up to several hundred thousand). Some of the Senators pointed out that the U.S. law is clear on the point involved: no officer of the Government may transact business with any firm in which he has a financial interest. General Motors is the Defense Department's biggest supplier, holds approximately 7.8% of the dollar volume of all the department's contracts. Wilson seemed astonished to learn that there was such a law. Said he stolidly: "What is good for the country is good for General Motors, and what's good for General Motors is good for the country."

Many Senators took a different view. The Senator who had started it all, Virginia's friendly-to-Eisenhower Harry Byrd, grunted that he had "never been so perplexed." Said Vermont's Republican George Aiken: "I don't see how Mr. Wilson ever could act as Secretary of Defense when his own personal interests are tied up with General Motors."

What to Do? While Democrats sat back and chuckled at the furor, Dwight Eisenhower aides searched for a solution. There was no indication that the Ikemen had foreseen the trouble. Massachusetts' Senator Leverett Saltonstall thought it might be all right if Wilson would agree to disqualify himself on all defense-G.M. dealings. Ohio's Senator Robert Taft suggested that Congress might quickly change the law to fit Wilson's case, but he added somewhat sharply that offering a solution is "their problem," i.e., the problem of Dwight Eisenhower and his close advisers. The problem extends below Wilson: three of the men named as his top aides also have stock in companies doing business with the Defense Department. A tougher case than Wilson's is that of Robert Ten Broeck Stevens, a textile manufacturer, who was appointed Secretary of the Army. His firm, J. P. Stevens & Co. of New York City, does a third (about $125 million a year) of its business with the Defense Department, mostly in cloth for uniforms. It is a family firm. If he sold his stock, management might pass to other hands, the firm might have to be completely reorganized, with consequences that would extend far beyond any personal sacrifice Stevens might have to make. The Stevens firm, however, sells to the Government on the basis of competitive bids, while General Motors has a number of large development contracts and other dealings in which discretion is necessarily in the hands of Government officials and finally in the hands of the Secretary of Defense himself.

Avoid the Appearances. In Wilson's case, the real danger of a conflict of interest is not where many Senators suppose it is. Knowing General Motors, believing that "what is good for the country is good for General Motors," Wilson, whether or not he sells his stock, might be inclined to load contracts on G.M. But companies like G.M. make smaller profits from Government contracts than they do from private business, and it might be to Wilson's interest as a stockholder to hold down the level of Government contracts to G.M.

No Senator, Democratic or Republican, suggested that there was any chance that earnest Erwin Wilson would be improperly influenced by his stockholdings. But there is the law, and most Americans probably approve the principle on which it rests. Rigid application of the law might make it hard to get into Government men of managerial backgrounds, as distinguished from men whose wealth comes by inheritance or speculation. The managers are more likely to have less money and to have it tied up in a way that is hard to move without loss.

However arguable the ethics of such practical considerations might be, the politics of Erwin Wilson's case are crystal-clear. The Eisenhower Administration has to lean over backwards to avoid any suspicion of personal profit from Government. It has to avoid not only evil but the appearances of evil. Unless Erwin Wilson sells his stock and goes to work, the Democrats will have something to yell about.

This file is automatically generated by a robot program, so reader's discretion is required.