Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-09-26
,STEEL MERGER SUIT
| TO SET PRECEDENT
|Corporation Practices May
Be Affected by Decision
of Ohio Court.
BY PRESTON S. KRECKER.

Specia Dispatch to The star.
NEW YORK, September 26.-Judicial
decisions which may have q widespread
bearing on corporation practices in the
future, particularly in merger and con-
solidaticn proceedings, are the predicted
outcome Of determination Of questions
involved In the litigation to enjoin the
proposed billion-dollar merger of the
Bethlehem Steel Corporation and the
Youngstown Sheet g. Tube Co.
After one of the longest corporation
legal battles on record, the trial of that
case has just ended. It began June rs
and continued almost without Interrupt
ton for Is weeks in the Mahoning
County Court, at youngstown, Ohio.
The testimony taken in the trial covers
about 10000 pages. Seeking to estab-
lish the legal rights of stockholders,
the Injunction suit to block the merger
has raised issues which, it is said, have
never been adjudicated by the courts
before.
Bonuses Questioned.
One of the outstanding issues raised
in this action which has attracted gen.
eral attention is the legality of the
bonuses which, the testimony revealed,
were paid to officials of the Bethlehem
Steel Corporation over period of years,
and, as matter OF fact, are being con-
tinued. Eyes were opened in amaze
ment when 1t was learned that Eugene
G. Grace, president of Bethlehem Steel,
received total salary and bonus last
year OF 81 ,635, 1853, and in the last i've
years has received altogether 5,497, 684
compensation.
Assuming that the jurist presiding
over the trial receives a $4,000 salary,
he would have to work 272 years to
earn as much as the head Of Bethlehem
Steel drew Gown in a single year. It
is by no means unprecedented for busi-
ness men to make a million dollars and
more in year, but in order to make
such an income they usually must in
cur certain risk of possible loss. In
the case in question, however, the re-
cipient incurred no risk at all. In that
respect, therefore, his case is probably
unique.
It was further brought out that, al
together, executives of the Bethlehem
Steel Corporation last year received in
salaries and bonuses about $500, 900,
all of which was calculated on net
earnings before depreciation and ahead
of the common stock. The president
received 3.3 per cent Of such net, 1t
was testified. For several years, while
officers of the corporation were receiv-
ing huge bonuses, no dividends what
ever were paid on the common stock.
No parallel for such bonus payments
is said to exist in current corporation
practice, and they are almost without
precedent. Andrew Carnegie, years ago,
when he was the undiSputed steel
master of the United States, paid his
boys" large bonuses, but he and his
associates were sole owners of the busi-
ness and had the undisputed right to
make such disposition of profits as they
saw At. The contention in the Bethle-
hem case is that the bonus payments
have been made without the knowledge
or consent of stockholders owning a
large per cent of the shares.
Other Legal Points.
It Is expected that the Ohio court
in deciding the case will have some
thing to say about bonuses and the
circumstances under which they may
be paid.
Other legal points of interest win be
decided. One is the question Of voting
stock actually owned by Others than the
voter. Evidence was taken at the trial
showing that Youngstown stock was
voted for the merger in the names Of
men who had sold their stock before
the meeting and, therefore, had no
personal stake at that time in the
Youngstown company. Proxies are al
legged to have been bought, contrary to
the laws of Ohio. It also Is commended
that proxies were issues on shares pur-
chased solely to vote the proxies, after
which the stock was sold.
If no other benefits accrue from this
bitter litigation, 1t may be that doubt
full points will thus be cleared up ana
precedent established to govern merger
proceedings Of the future.
Ccopyright. 1900