.A55 CONTENTS WITNESSES INVESTIGATION OF THE NAVAL DEFENSE PROGRAM WEDNESDAY, MAY 27, 1942 HOUSE OF REPRESENTATIVES, NAVAL AFFAIRS INVESTIGATING COMMITTEE, Washington, D. C. The committee met at 10:15 o'clock, pursuant to call of the chairman, in room 313, Old House Office Building, Representative Carl Vinson, Georgia, chairman, presiding. Present: Representatives Carl Vinson, Georgia (chairman); William H. Sutphin, New Jersey; L. Mendel Rivers, South Carolina; James H. Heffernan, New York; William H. Wheat, Illinois; Thomas A. Flaherty, Massachusetts; W. Sterling Cole, New York; William E. Hess, Ohio; Michael J. Bradley, Pennsylvania; Ed. V. Izac, California; George J. Bates, Massachusetts; Arthur B. Jenks, New Hampshire; John Z. Anderson, California; William S. Jacobsen, Iowa. Also present: Edmund M. Toland, general counsel; William J. Shaughnessy, assistant general counsel; and Thomas S. Hinkel, assistant general counsel. The CHAIRMAN. Let the Naval Affairs Investigating Committee come to order. Mr. Toland. Mr. TOLAND. Mr. Chairman, the case that I propose to present to the committee involves the Lincoln Electric Co., an Ohio corporation located in Cleveland, Ohio, one of the leading manufacturers of welders and welding equipment in the United States. In the year 1941, the gross sales of this company were $24,449,213.95, as compared with gross sales of $13,905,059.35 for the year 1940. During 1941, the company paid bonuses to employees in the $1,800 to $2,600 bracket ranging from $3,000 to $5,000, respectively. The department heads and officers, whose salaries ranged from $3,200 to $12,500, were paid bonuses ranging from $10,000 to $50,000, respectively. Illustrations of the bonuses are as follows: T. E. Jerabek, foreman of the plant, whose salary in 1941 was $1,121, received a bonus of $25,000; A. F. Davis, secretary of the company, whose salary was $6,634, received a bonus of $50,000; H. F. Kneen, plant superintendent, whose salary was $8,015, received a bonus of $50,000; C. M. Taylor, vice president, whose salary was $12.452, received a bonus of $40,000. The above employees have been with the company from 2 to 14 years. The company's business during the years 1940 and 1941 has been practically all Government business. Illustrative of the selling price and factory cost of certain types of welders manufactured by the Lincoln Electric Co. are the following: The factory cost on one item was $72; the selling price was $180. The factory cost on another item was $77; the selling price was $225. The factory cost on another item was $150, and the selling price was $380. The factory cost on another item was $175, and the selling price was $435. The factory cost on another was $197, and the selling price was $495. On another item, the factory cost was $245, and the selling price $665. Another item, the factory cost was $292, and the selling price, $720. The factory cost on another item was $187, and the selling price, $450. In addition to the salaries and bonuses, we will show the committee that dividends were paid to the officers, and we will set forth and bring out the amounts of the dividends. The purpose of presenting this case to the committee is in line with the policy of the committee heretofore with regard to profits on contracts with the Government and the evasion or the avoidance of excess-profits taxes, and the necessity for the consideration by the committee that in Government contracts there should be some ceiling fixed on the amount of bonuses paid to officers and employees. It is with that purpose in mind that the matter is being presented.. The CHAIRMAN. All right, call your first witness. Mr. TOLAND. Mr. Taylor. The CHAIRMAN. Hold up your right hand. The evidence you are about to give the Naval Affairs Committee shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. TAYLOR. Yes, sir. TESTIMONY OF C. M. TAYLOR, VICE PRESIDENT, LINCOLN ELECTRIC CO., CLEVELAND, OHIO Mr. TOLAND. Mr. Taylor, will you give the reporter your full name, please? Mr. TAYLOR. Clarence Minor Taylor. Mr. TOLAND. Where do you reside? Mr. TAYLOR. South Euclid, Ohio. Mr. TOLAND. That is in the city of Cleveland? Mr. TAYLOR. It is a suburb of Cleveland. Mr. TOLAND. What is your present business or occupation? Mr. TAYLOR. I am vice president in charge of sales. Mr. TOLAND. Of the Lincoln Electric Co.? Mr. TAYLOR. Of the Lincoln Electric Co. Mr. TOLAND. How long have you been connected with that company? Mr. TAYLOR. Since 1916. Mr. TOLAND. What is the salary that you have received, annual salary, over that period of time? What was the entrance salary when you started with the company? Mr. TAYLOR. Sixty dollars a month. Mr. TOLAND. What is your annual compensation that you received, for 1941? Mr. TAYLOR. About $53,000. Mr. TOLAND. I am asking you for the salary, not the bonus. Mr. TAYLOR. Oh, twelve fifty. Mr. TOLAND. Twelve thousand four hundred and fifty-two dollars? Is that the correct amount? |