Evening star., 1933-06-09

The ruling by the Reconstruction
Finance Corporation that high salaries
for officers are inconsistent with the
granting of government loans to cor
porations is received with considerable
favor by the public. 1t is held that II
the recipients executive ability Is the
basis for the very large salary, he
should be able to maintain the organi-
zation's financial stability without re-
course to public funds. On the other
hand, there is some protest that olc-
tation in the matter should be re-
strained, because of the difficulty of de-
termining the value received by the
company from the highly paid official.
1.-TWO recent developments" says the
Chicago Daily News, may combine TO
end fragrant corporate abuse: The
swollen profits of the boom decade per-
mitted an unprecedented increase in
the salaries and bonuses paid to many
corporate officials. When surplus earn
ings were succeeded by deficits during
the depression those official incomes re-
manned at or near the high levels, and,
in many cases. were serious drain on
highly necessary cash reserves. Stock
holders who sought to enforce salary
reductions were defeated by the votes
of stock and proxies controlled by the
highly paid officials. Within the last
few days the United States Supreme
Court and the Reconstruction Finance
Corporation have disapproved of over
stuffed salaries and excessive bonuses.
The Finance Corporation, in ruling that
the higher railroad salaries must be
reduced sharply as prelude to further
Federal loans. set a precedent that
probably will have broad influence on
sentiment outside the field OF trans
portation. The Supreme Court, in de-
Gliding a tobacco company case, out
lined clearly the grounds on which a
dissenting shareholder may seek re-
dress" Reviewing the court case, the
Daily News emphasizes that the ruling
is against salaries SO large as in sub
stance ard effect to amount to spolia-
and sees it as powerful weapon" in
the hands of "the frequently forgotten
stockholder."
The occasion of the ruling" it is
pointed out by the New York HeraldS
Tribune, was the grant of loan of
$23 900, 900 to the Southern Pacific Co.
A report to the Interstate Commerce
Commission last June showed that this
company paid the chairman of its board
S135 900 a year. cut from a previous
high of $l50,000; that it paid its vice
chairman $76.5 500 and its president $780,
600 What the plain citizen will note
is that each one of these gentlemen,
even on the basis of reduced wage,
was receiving In June. 1892, more than
the President of the United States. A
list of twenty salaries paid by other
roads at the same time shows eight of
them in excess Of that which goes with
the occupancy of the White House. Per-
haps the latter is not a just criterion.
Certainly it bears no remote relation to
the value of Presidents services. Yet
1t is arguable that if he is able and
willing to get along on it there Is little
reason why railroad executives whose
are not earning their fixed |
charges should demand more: why. in |
fact. they should not be content with |
less"
The corporations must prove that |
the salaries are not excessive" observes /
the Nashville Banner. with a review of .
the provisions made: "The cuts will re-
main in effect until the loans are liqui-
dated or until the corporations meet
fixed charges out Of revenue. The ac-
ton taken by the Reconstruction Fl
nance Corporation directors is aimed at
such corporations as are paying salaries
which the directors feel are higher than
IS warranted, at least while the bor-
owing institutions are unable to finance
their own requirements and are apply
ing for Government funds A number
Of railroads and possibly some banking
Institutions and insurance companies
are affected by the new procedure. AT
present. however, few of the larger
banks paying high salaries are seeking
oans"
The theory is" according to the
Omaha World that If c0rpo-
ration is in the red, losing nonev. un-
BILE TO pay its debts, in danger of bank
.uptcy, 1t cannot afford to pay big
,alaries to its executives. And the rule
S to be that II 1t insists on paying