MANAGEMENT: Slimming the Bonus

Ever since the late Charles M. Schwab took over Bethlehem Steel in 1905 and set about making it the nation’s No. 2 steelmaker (after U.S. Steel), the company has prospered by paying the fattest executive bonuses of any U.S. corporation. Last year Bethlehem’s President Arthur Homer received $100,000 in salary, plus $411,249 in bonus, making him the highest-paid U.S. corporate executive. For years many Bethlehem vice presidents have been paid more than presidents of larger companies. Last week Homer and the 19 other Bethlehem executives who share in the company’s lush incentive plan took a drastic pay cut. As a result of a suit brought by seven minority stockholders, who complained that Bethlehem’s brass is overpaid, the company proposed a new salary plan for stockholder approval July 28. If the plan had been in effect last year, it would have trimmed $2,200.000 from the total $6,058,226 pay of the top 20, made Homer, at $322,335, only the nation’s ninth best-paid executive.*

Heart of the new plan is a substantial increase in the base pay to 60% of total executive pay last year. Homer’s new salary would be $306,749. On top of that, instead of a regular bonus, he and other executives would get special “dividend units,” computed on the size of earnings and dividends, entitling them to receive dividends on the same basis as stockholders until 15 years after they retire (or to their estates if they died). Initially, these dividends would be small (e.g., Homer’s share, based on 1958 figures, would have been only $15,586), but over the years they could conceivably build up to the point where a future president might get more than under the old bonus system. No Bethlehem executive is so optimistic as to expect bonuses to return to what were the really good old days. In 1929 President Eugene Grace set an alltime record by collecting $12,000 as salary. $1,623,753 as bonus.

* And made G.E.’s Ralph J. Cordiner ($399,999.50) the No. 1 man on the big-pay list.