Bethlehem's Bonus Battle

Since Bethlehem Steel Corp. was formed in 1904, its spirit has been that of big, voluble Charles Michael Schwab. Unpleasant to Chairman Schwab is the successful way in which Cyrus Stephen Eaton has blocked Bethlehem's attempts to merge with Youngstown Sheet & Tube Co. Unpleasant to Chairman Schwab has been the recent challenge of minority stockholders who decry the bonus plan which in 1929 gave President Eugene Gifford Grace $1,623,000 and that much again to lesser executives. Of this latter unpleasantness, a phase which developed last week must have been particularly unpleasant to Chairman Schwab. To each of Bethlehem's 40,000 shareholders he had to send a long account of why he approved the bonus plan, had to ask for proxies to be voted in favor of the plan at Bethlehem's annual meeting next month.

Typical of the attitude of protesting stockholders was a letter sent Mr. Schwab last week by Roy William Hebard of New York, president of R. W. Hebard Co. Inc., engineers: "It is preposterous to claim that any such reward as your company has paid Mr. Grace and others is indispensable to obtaining 'unusual effort and ability.' There is no convincing evidence at hand that Bethlehem Steel is any more efficiently managed than innumerable other companies. Nor is there any evidence that the officials of Bethlehem Steel, including Mr. Grace, possess any greater degree of 'exceptional ability' than that found in hundreds of other corporations whose officials are paid salaries ranging from $25,000 to $75,000 a year."

Chairman Schwab had told stockholders that he had obtained the idea of a bonus plan from that great and canny Steelman Andrew Carnegie, who gave Charles Schwab a yearly bonus of $1,000,000.* Scoffing this, Mr. Hebard wrote: ''Your reference to the $1,000,000 bonus paid to you by Mr. Carnegie 30 years ago does not mention that the fabulous profits realized then by the iron and steel industry were due not so much to any super-management but rather to the utterly unjustified high protective tariff and the rail pool. No such profits are obtained today."

* During the War, when the Kaiser was handing out Iron Crosses, German-blooded but 100% American Mr. Schwab made flamboyant retort by handing out to Bethlehem executives who made a yearly $1,000,000 or better under the bonus system, rich diamond crosses about 1 1/2 in. high.

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