Evening star., 1950-05-03
Major Industries Find
Salaries Not Enouuh
To Satisfy Executives
Net Earnings After Toxes
Are Often Much Less Than
Those in Small Business
By David Laurence

President Truman finds it hard
to get good men to serve the Gov
ernment at the salaries that Con-
gress provides, but a much more
interesting development is the
fact that major industries are
now finding it hard to keep good
men satisfied even at high SAL
aries.
The other day General Motors
released some information about
salaries and bonuses paid its man.
agement men. 1t had to be made
public under the law requiring
that certain information be given
to stockholders. But the incident
gives a hint of something that
has been bothering the larger
companies in recent years and
which they haven't said much
about publicly.
Thus. while Charles E. Wilson,
president of General Motors, for
example. received an income of
about $560.000 last year out of
which after taxes he retains an
estimated $4,000. the real ques-
ton is not whether the net
amount he keeps is big or little
but why he keeps on working for
General Motors at all when any
one of 100 men in the United
States who have dealerships in
the automobile industry undoubt-
edly net far more money a year
than he does. These dealers pay
a smaller tax and build up a
business they can pass on to their
families.
ShortSighted View.
Some observers-as, for in
stance, a business man who wrote
to this correspondent the other
day-wonder whether publication
Of the large salaries and bonuses
doesn't give ammunition to labor
union partisans, the theory being
that maybe labor's share isn't big
enough and management's share
might be smaller. This is a short
sighted view of the real problem
that faces industry today. For
the truth is that only about half
the corporations in America are
making any money and the ones
that are making profits are doing
SO because of the excellence of
their management talent.
There are some auto companies
which would gladly pay as much
as General Motors does for tor
men II they could be assured OF
similar profits. Actually the Ford
Motor Car Co. took away some OF
the General Motors men in recent
years by offering them induce
ments that go to the heart of the
question of what are adequate in
centives.
The management group OF
General Motors is today reSpon-
sible for having developed a pay
roll to labor exceeding 81 billion
year and that same efficient
group in 1949 brought $3.50 million
to the stockholders in dividends
But those same executives cannot
pass on to their children any
ownership in General Motors Corp.
unless, like anyone else, they buy
stock in the open maket. If there
were way by which they could be
given stock ownership, they would
have to pay straight income taxes
just as if it were cash received.
No Way to Build Estate.
There is no way under present
tax laws that management ex-
ecutiveS can build up an estate
for themselves comparable to what
a small business man can do by
developing business of his own
with little capital and selling it
at the end Of perhaps 10 years for,
say. 81 million. On that sum he
will pay only 25 per cent in capi-
tai gains tax. To save 81 million
out Of salary after taxes, on the
other hand, a man like Charles E.
Wilson would have to work 10
years as a top executive and be
able to earn a net of $4,000
every year for 10 years and save
the bulk of it. Every one of the
10 years would have to be good
enough years to earn a bonus
Few executives in the past have
reached the top early enough ir
life to average a big salary for q
decade.
In the case of the late William
Knudsen, president of Genera
Motors, who received a somewha
similar salary in 1899, the tax rate
in pre-war years we're lower
Hence Mr.. Knudsen had bette
net income than does Mr.. Wilson
today and he had less responsible
ity.
The subject affects management
men in all industries to a create
or lesser extent than the case o
Mr.. Wilson. The Ford Compan
has found ways to attract men b
offering stock ownership in sub
sidiary companies which appreci
ates in value over the years.
it were not for the tax laws. thes
inducements would not be neces
sary. Also, not many companie
have subsidiaries that can be uti
lized for that purpose.
Job creation is going to be yer
important in the future year.
especially as high-school and col
lege graduates begin this summe
grim search for work. Unles
incentives are provided to increas
the number of jobs. more un
employment will result. And un
less tax laws are revised to furn
ish incentive to management an
enterprising individuals, there wi
be less rather than more jol
creation hereafter.
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