The Golden Touch

A big new problem for many a U.S. tycoon is how to stop making money, what with taxes, the opprobrium attached to high earnings in wartime, and all. But when a tycoon has used extraordinary ingenuity for many years in devising ways & means to make the money roll in, he cannot easily or suddenly disengage himself from the golden flow.

One American Midas who has struggled rigorously to keep the money from rolling in is Thomas John Watson, president of International Business Machines Corp. He was No. 2 on the 1939 list of the top ten salaries ($442,560). Of this honorarium, $100,000 was salary. Most of the rest was extra compensation, in lieu of royalties, on his patents. After a $6 dividend to stockholders, Tycoon Watson took 5% of net earnings.

In 1941 his returns crept up to $462,519. Mr. Watson reduced his 5% take to 2 1/2% as of Jan. 1, 1942. I.B.M. business multiplied. As 1942 approached its end, President Watson again faced an inevitable, enormous bonanza. He took a drastic step, requested that his extra compensation for 1942 be no greater than in 1939, explaining that thereby he would avoid personal profit from the company's munitions busi ness, of which it had none in '39. (Watson is a trustee of the Carnegie Endowment for International Peace.) Result of his abnegations: President Watson received a mere $428,189 from I.B.M. in 1942. Of this, $325,549 was extra compensation, which would have been $524,299 had it been computed on the basis of 2% of net earnings on non-munitions business only. But he was cutting down magnificently: of 1942's $428,189, Federal and State taxes took all but $56,278.

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