The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-07-17

First Boston Corp. S
Proft-Sharing
Plan Novel.
BY VINCENT LYONS
Times Financial Editor

by VINCENT LYONS
Times Financial Editor
DACK in the flush days Of pros
ID perity the Graces and the Hills
were receiving huge bonuses over
and above their annua! salaries.
Although a stockholders lrerOga-
tive, the voting of such bonuses
was accomplished with consummate
ease for the stockholders them
selves were too busy sitting in bro
kersge Offices and watching the
dizzy antics OF the ticker tape 10
attend meetings.
And II some intrepid owner did
attempt TO question the motives
outlided AZ an annual meeting he
would be shouted down BY the Sibi-
liant tone Of corporation "stOoge"
planted there purposely TO heckle
any one who dared TO embarrass
the administration. Since then,
however, the confraternity Of stock
holders has been transformed
from Casper Milquetoasts to Don
Quixotes.
With the preceding as back
ground. it is refreshing 70 learn
that the First Boston Corp, one
OF the largest investment banking
houses in the country. has devised
a unique plan Of proflt-sharing for
employees and executives. The plan
in essence is so simple that It will
probably come as an annoyance to
those stockholders Of corporations
whose executives received stable
bonuses in the '20s.
Il TNDER the terms of, the ar
~ rangement a compensation
committee will be formed. 1t will
be composed of three stockholders
OF the corporation, none Of whom
is an officer, director or employee.
At the close of each year the bal
ance Of net earnings, after pro-
viding for an 8 per cent return to
all stockholders. Will be separated
into two divisions. OF this amount
80 per cent will be set aside for
surplus. undivided profits or other
wise applied for the benefit of
stockholders and the remaining 20
per cent will be put at the disposal
OF the compensation committee.
Thus, with the fund of 20 per
cent Of the years surplus the COM
penSation committee can go into
a huddle and ascertain the method
Of distribution of this money. They
can vote so per cent to officers and
so per cent to employees. or they
can make any disposal which they
believe fair
The interesting point about
such program is that the
originator Of the plan recognizes
the fundamental fact that the
stakeholder is a partner Of the
corporation and then attempts TO
treat him As such Previously the
beneficiaries of bonus payments
scheduled the method of diStribu-
ton and held their breath until
the scheme was approved by stock
holders. which. as was pointed out,
was not difficult.
THE plan as outlined does not
Il mean that the committee of
three stockholders will have abSo-
lutte powers in the ticklish task of
voting a share in the profits. The
stockholders as a group will re-
tain their right to refuse to sane
ton any payments in this man.
ner. Moreover. no distribution is
to be made if the undivided profits
at the close of one year are lower
than at the close of the preceding
year
Under terms of the proposition
the key-man in the organization
would not be unable to monOpollze
the profits available for bene-
ficiaries. The obstacle to such an
eventuality is contained in a pro-
vision which states that the dis
tribution would not be made to less
than IS officers and employees and
under some circumstances to more
than that number.
Opposition TO proft-sharing sys-
TENS is more seeming than real.
Much of it is attributable to the
huge sums taken out of corpora
tions by some executives several
years ago and. undoubtedly. would
be removed where the conditions
and limitations i'll regard TO pay
ments, are so clearly set out as in
the case of the First Boston Corp.
They are particularly apropos for
companies such as the investment
banking house where individual
ability and foresight can mean so
y,,,,cf, n tho StOcEbOlderS