fundamentally, so that we can give them a separation wage when we have to drop them off. I say to you, sir, that that sort of thing in their minds gives them an entirely different point of view toward their job, toward their company, and toward their efficiency, from what it would be if we had said to them, "All right, you come in. I don't know how long it will be. As soon as we are through, out you go." It is an entirely different thing. It is the difference between that halfback running through the broken field and that same halfback going into the locker room with everybody patting him on the back. The CHAIRMAN. Does the employee contribute anything to that trust fund?

Mr. LINCOLN. Not in any way, and the only reason that was set up was for that purpose.

The CHAIRMAN. I think that a great many people are going to be up against situations when the war is over, and I think that is very commendable.

Mr. FLAHERTY. May I ask one question, Mr. Chairman? I would like to inquire of you, Mr. Lincoln, as to the selling price of your articles as compared with your competitors.

Mr. LINCOLN. I would be very glad indeed to answer that. Now, remember the situation the competitor faces. He must meet the market. In other words, the competitor, whether he makes money or loses money on a job, has to meet the market. At the present time, I think I am right in saying that there isn't a single one of our competitors who is selling electrodes, for instance, at as low a price as we are, because of the fact that they don't have to.

Mr. TOLAND. How about the welding machines?

Mr. LINCOLN. In the case of the welding machines, I can say this: Some of them are; in the case of General Electric, Westinghouse, I can assure you they do; in those cases it makes very little difference, you see; their welding-machine business is a matter of a quarter or a tenth of 1 percent of their total business.

Mr. FLAHERTY. Are they underselling you?

Mr. LINCOLN. They do not. The prices are just about in line. Mr. FLAHERTY. Do you think they make more of a profit if they sell one of their machines compared to what business you do?

Mr. LINCOLN. Well, I can say this as to what they tell me, and understand, I have no other data on it except what they tell me. They have told me that on both machines and electrodes they have never made a cent.

Mr. FLAHERTY. Never made a cent?

The CHAIRMAN. Now, Mr. Toland.

Mr. FLAHERTY. Then it gets down to this. One other question. I assume from what you have stated here today, taking the combined salary and the bonus of your employee, that your individual employee is paid more than the employee of Westinghouse or the General Electric shop.

Mr. LINCOLN. I would say the average is nearly double.

Mr. FLAHERTY. You would say the average is nearly double? Mr. LINCOLN. It wouldn't be quite that much, but I would say it would average certainly two-thirds more.

Mr. FLAHERTY. It certainly reflects, Mr. Chairman, that through the efficiency with which this man has conducted his organization, through the benefit of these bonuses that have been given back to the men, there has been increased efficiency, and it certainly should be

carried out, I think, in every industry if it can be worked to the same perfection that this company has worked it.

The CHAIRMAN. How much do you attribute increased production to be brought about by your liberal policy of practically 50 percent! Mr. LINCOLN. Mr. Vinson, I have thought of that thing many times, and I would like to explain it, because I am very much of an enthusiast on this point, and just what you have said, Mr. Flaherty, is exactly what I believe. I would hesitate to say such a thing myself, but I thoroughly agree, and I was very glad to come down here to show what has been accomplished, not by myself, not by the organization necessarily, but by this fundamental principle.

Mr. FLAHERTY. I think the mistake that you have made which has brought this matter to our attention is the fact that you didn't increase the salaries of your officers to what they were entitled to, and it is reflected in bonuses. Certainly men who gave you certain services like the man who adapted that formula for your electrode-he was entitled to something for that. You didn't give it to him in salary; you gave it to him in the form of bonuses. You could have given him a larger gift for the contribution he has made to your work.

Mr. LINCOLN. I can explain it this way. Don't forget that the strength of our organization is the fact that we have all men for the one operation; they are for the Electric Co. We are all working for the company. Now, when you have a situation of that kind, you are going to come on hard times. We had hard times in 1932. These people during that time had these low salaries; so that we can scrape through a difficult kind of time without going broke. We are afraid that sort of thing is going to occur when this thing is over. Take a man, we will say, and give him $20,000, and say to him, "Well, it is so tough now we are going to cut you down to five," and that takes a lot of the spirit out of him. Cutting a man's wages or salary of itself is a depressing thing. Therefore, we go to these men, and we have talked it over very carefully, very frankly, all the way through, and we have agreed among ourselves that the thing to do is to keep those salaries right down at a minimum, to the point where they certainly could live all right under any conditions, but certainly where there would be no fat on them at all. So when those times did come, we could skate through them without the failure of the company. That was the plan; the idea; that was the fundamental principle, and carries out the same thing which I have outlined to you now, of all of us together trying to do a job.

Mr. TOLAND. Mr. Lincoln, the first time that you gave any bonus was in 1934?

Mr. LINCOLN. That is not true; it was in 1918, which was the time that the first dividend was paid. I, at that time, had this same idea. Now, wait a minute, let me finish.

Mr. TOLAND. Go ahead.

Mr. LINCOLN. I had this same idea, and what we did was to pay a dividend, the first dividend the company had ever paid.

Mr. TOLAND. Well, I asked you about bonuses.

Mr. LINCOLN. Let me finish. I will tell you in a minute.

Mr. TOLAND. Go ahead.

Mr. LINCOLN. And we split that dividend in two-gave half of it to the men as a bonus and gave the other half to the stockholders. That was the first bonus.

Mr. TOLAND. And how much was that?

Mr. LINCOLN. Unfortunately-I will finish again-the size of that first dividend being so small, the total amount which each man got didn't make much of an impression on him and the result of it was that we didn't think that the result was what we expected it to be. Mr. TOLAND. How much was it?

Mr. LINCOLN. It ran at that time about between 312 and 4 percent. of the man's wages for the year.

Mr. TOLAND. Now, that is the only time before 1934?

Mr. LINCOLN. That was the only time before 1934.

Mr. TOLAND. Your position before the committee is that the bonuses that you have given in 1934 have largely been the result of the reduction in the price or cost of your article, isn't that true?

Mr. LINCOLN. That is largely true. There is also the additional item that it has increased the ability-it has increased the ability and skill of each man because of the fact that he has attempted to do the job better because of the fact that he felt he was working for himself. Mr. TOLAND. Well, now, let's see how much of a reduction in the cost of the articles that you sell there was since 1934, since the period from 1917 to 1934.

On standard stationary welder type No. 300, that was $1,731 in 1917, wasn't it?

Mr. LINCOLN. 300-ampere? I haven't the figures here. I have it for the 200. I would say it was about that.

Mr. TOLAND. Well, let's take 200. That was $1,478 in 1917?

Mr. LINCOLN. That is correct.

Mr. TOLAND. In 1934 it was $650; in 1941 it was $415. So that the reduction in the cost of that item from 1917 to 1934 was greater than the reduction from 1934 to 1941?

Mr. LINCOLN. That is right.
Mr. TOLAND. Is that right?

Mr. LINCOLN. That is correct.

Mr. TOLAND. Isn't that true of every item that you made?

Mr. LINCOLN. No.

Mr. TOLAND. Take a look at those and see on the standard type.

Mr. LINCOLN. Oh, you are speaking of welders.

Mr. TOLAND. I am talking about welders.

Mr. LINCOLN. I would say that would be true. Remember in 1917— may I tell this story, because I think it is very much to the point? Mr. TOLAND. Make it short.

Mr. LINCOLN. In 1917 I went to the good admiral who was the head of the Emergency Fleet Corporation at that time, with a great deal of enthusiasm in connection with the welding of ships. That is the way they are made now. At that time I was younger and more enthusiastic than I am at the present time, and I told the good admiral that I thought we could weld ships and by so doing we would save a lot of time making better ships, and so forth. I remember that with a sneer on his face that got deeper and deeper, he finally said to me, "Lincoln, that is all nonsense. You can't weld ships. I would undertake to kick off any welding you might put on."

I merely want to cite this, that from that time until now the entire idea of building ships has changed from riveting to welding. Now, the reason that has changed is largely because of the fact that the Lincoln Electric Co. has developed methods, techniques, and rods and machines which will do it.

Mr. BATES. Is your organization the only one that has done it? Mr. LINCOLN. That is not true, sir. What I say is that we were the leader in it. We are the people who took the leadership in it. Mr. TOLAND. The fact of the matter is that prior to 1934 there was a greater reduction in the selling price of your welder machines than since 1934 to date; isn't that true?

Mr. LINCOLN. Mr. Toland

Mr. TOLAND (interposing). Is that true, yes or no? Isn't it true? Mr. LINCOLN. Can I answer the question?

Mr. TOLAND. Isn't it true, yes or no?

Mr. LINCOLN. Can I answer your question?
Mr. TOLAND. Yes.

Mr. LINCOLN. The answer

Mr. TOLAND (interposing). Make it short, will you?

Mr. LINCOLN. The answer to that question is this: I tried to explain to you that in 1917 welding was done very, very little. Therefore, the number of welders-the number of people on it, the amount of brains that were put into the development of the process, the number of people working on it was comparatively small. As it increased in popularity, it increased in volume, and as you so wisely said, Mr. Toland, when we were talking about this before, there is no doubt that if manufacturing ability is applied to it, that as your volume increases, your costs will decrease if you have proper manufacturing facilities. Now, let me answer your question.

Mr. TOLAND. All right.

Mr. LINCOLN. In 1934-let's take this particular machine-it sold for $550. It is a 200-ampere welder. At the present time it sells for $360.

Mr. TOLAND. Yes; but what was it in 1917?

Mr. LINCOLN. That was $1,478.

Mr. TOLAND. So there was a greater reduction.in that welder before 1934 when you didn't give any bonuses, except the one in 1918, than there has been during the period that you have given bonuses?

Mr. LINCOLN. All right. The relationship is a matter of about a 60-percent decrease in one case and in the other case about-wait a second-about a 60-percent decrease in one case and about an 80-percent decrease in the other.

(Welder prices comparison was received in evidence, marked “Exhibit No. 366," and is printed in the appendix of this volume.)

Mr. TOLAND. Now, Mr. Lincoln, you have talked and made a lot of statements about the philosophy of giving bonuses.

Mr. LINCOLN. Well, the philosophy of manufacturing—

Mr. TOLAND (interposing). Wait a minute.

Mr. LINCOLN. I should be glad to give you a copy of this.

Mr. TOLAND. Will you let me finish?

The CHAIRMAN. Mr. Lincoln, go ahead and answer the question. Mr. TOLAND. I want this witness to be instructed that I am going to examine him.

The CHAIRMAN. You go ahead and ask the questions and he will answer them.

Mr. TOLAND. I don't want any speeches.

The CHAIRMAN. All right.

Mr. TOLAND. Didn't you write a memorandum to keep it secret? Mr. LINCOLN. Didn't I answer that?

Mr. TOLAND. I am asking you this question: Didn't you write a memorandum that the bonuses should be kept secret and that the checks should not be shown to anyone and should be only cashed at a bank? Didn't you or did you?

Mr. LINCOLN. Did I make such a note? No; I did not.

Mr. TOLAND. Did you write such a memorandum?

Mr. LINCOLN. I did not.

Mr. TOLAND. Take a look at that and see if you want to change your testimony.

Mr. LINCOLN. I might say that I have told the men to do that. Mr. TOLAND. See if you don't want to change your statement? Mr. LINCOLN [examining papers]. Well, I don't know where this came from.

Mr. TOLAND. It came from your files.

Mr. LINCOLN. Did it?

Mr. TOLAND. Yes, sir.

Mr. LINCOLN. I don't remember it. I say the same thing. I don't remember writing the note.

Mr. TOLAND. I would like to read and offer in evidence a statement by the witness that bears his signature that

all matters concerning the bonus be kept secret. Do not show check to anyone. Do not cash check at any other place than a bank.

(The memorandum referred to was received in evidence, marked "Exhibit No. 367," and is printed in full in the appendix of this volume.)

Mr. TOLAND. Didn't you also get a memorandum from Mr. Kneen recommending that steps be followed to keep the bonus checks a secret and urging the men to keep the other men from seeing the checks or comparing them or cashing them in saloons? Didn't he also suggest that the company request the bank to stay open on a Saturday afternoon for convenience in cashing the checks; and didn't he also suggest putting the checks in sealed envelopes and printing on the face of the envelopes "Confidential. Please cash this only in a bank. Do not show it or talk to anyone about it in the plant or out." Do you remember getting that?

Mr. LINCOLN. I don't remember it, but that would have been my idea, certainly. I expressed the idea to the men themselves.

Mr. TOLAND. Didn't you call a meeting on Saturday, December 13, of the keymen of your organization? "Will you meet with me in my office on Saturday afternoon, December 20th, immediately after the general distribution of the bonus."

Mr. LINCOLN. I did.

(Memorandum from Mr. Kneen referred to was received in evidence, marked "Exhibit No. 368," and is printed in the appendix of this volume.)

(Memorandum referred to was received in evidence, marked "Exhibit No. 369," and is printed in the appendix of this volume.)

Mr. TOLAND. Didn't you distribute at that time the bonuses to the key officials?

Mr. LINCOLN. I did.

Mr. TOLAND. I show you a letter from the Central National Bank and ask you if you recall seeing that or if you recall those arrangements being made?

Mr. LINCOLN (reading):