Mr. JOHNSON. Do you operate your plant 7 days a week? Mr. JACK. At the present time we have been operating 7 days a week, but we have got to let a man off about every third Sunday in order that he will have something to look forward to, so that he can have one day off at home. Mr. JOHNSON. You are now working 84 hours a week? Mr. JACK. Approximately so; some of them work longer than that. Mr. ANDERSON. Mr. Chairman, just one question. Mr. Jack, you have in your employ one secretary who received last year total compensation amounting to approximately $40,000. That is Miss Adeline Bowman-$39,356.70. Mr. JACK. Whatever the record shows, but her compensation for last year, if you took it just for the year, I believe would be $25,000. Mr. ANDERSON. Plus bonuses? Mr. JACK. Plus bonuses. Mr. ANDERSON. Yes. Do you actually think that the secretary, capable as she may be, is worth three or four times as much to this country's war-production effort as the services of General MacArthur? Mr. JACK. No, sir; no, sir. Mr. ANDERSON. You are paying her on that basis. Mr. JACK. I don't know what General MacArthur gets. Unfortunately, the Government doesn't pay its Army and Navy officers that much, or can't do it, I guess. Mr. ANDERSON. I will say he gets about 25 percent of Miss Bowman's salary. Mr. TOLAND. I would like to offer in the record a statement as to the advances by the War Department and the Navy Department to this company to the extent of $2,423,391. The CHAIRMAN. Read that again. What is this? Mr. TOLAND. This is money advanced by the Government under contract funds equal to 30 percent of each contract-$2,423,391.25. The actual investment, plant and equipment, of the company is $329,945.38, as contrasted with the capitalization of $100,000 which we have had testimony about. (The schedule of advances under War and Navy contracts to Jack & Heintz, Inc., was received in evidence, marked "Exhibit No. 77," and is printed in the appendix of this volume.) Mr. TOLAND. I would like to offer additional pay-roll records. (Pay-roll records of certain employees of Jack & Heintz, Inc., were received in evidence, marked "Exhibit No. 78," and are filed with the committee.) Mr. TOLAND. I would like to make one recommendation to the committee in this case, that it recommend to the War and Navy Departments that they send an officer to this plant for the protection of Government funds. The CHAIRMAN. Now, Mr. Toland, we issued a subpena duces tecum and have some documents here, and you go over what we don't need to go in our record and turn back to the company what we don't need, and we have the printed record of all that. Mrs. Wright, please fix up the vouchers to pay these witnesses. Mr. TOLAND. They will submit their bill. Mr. MAAS. What, no bonus? Mr. TOLAND. They submit their bill and get their railroad fare or 5 cents a mile. The CHAIRMAN. That is right. All the witnesses in the hearing on Jack & Heintz, Inc., are now excused until further notice from the committee. Mr. TOLAND. Mr. Chairman, will you ask the president of the company or his comptroller to furnish-I asked him to furnish it but he didn't have time-a break-down as to the amount of money that has been paid for overtime in excess of 8 hours, in excess of 12 hours, and double time? The CHAIRMAN. We will write them a letter about that. All right, the committee will take a recess and all the witnesses are excused until tomorrow morning at 10 o'clock, at which time we will have Mr. Donald Nelson and the Treasury Department here on the other bill. Mr. MAAS. What about having representatives of the Army and Navy here in regard to this company? The CHAIRMAN. We will go back over that. Thank you very much, all you witnesses, and you are excused. STATEMENT OF EDMUND M. TOLAND, COUNSEL FOR THE NAVAL AFFAIRS INVESTIGATING COMMITTEE The CHAIRMAN. Now, Mr. Toland, I have read the document that you have there and I am familiar with it. Can you hit the high points in it, and file the parts in the record that are not so glaring? Mr. TOLAND. Yes, sir. May I make this observation, Mr. Chairman: I am not counsel for the Naval Affairs Committee as such but counsel for the Naval Affairs Investigating Committee, for which we have a separate reporter. May this reporter be instructed that the statement that I make be transmitted to the reporter for the Naval Affairs Investigating Committee? May I further request that on Friday the committee sit as the Naval Affairs Investigating Committee for half an hour? We have made an exhaustive study of the system used in Canada, Britain, and Australia, with regard to profits and labor relations, and we have the information right down to the present time. I would like on that day to put that study in the record for the benefit of this committee. The CHAIRMAN. You will be here on Friday and we will put it in the record. Mr. TOLAND. Now, in connection with the questionnaires that we have sent out, in excess of 25,000, we have made, and are making right now, many surveys. In a great many of the instances, the contractor did not give us the full information that we requested, and we are continually corresponding with them. One of our studies has been to try to find out just exactly the increase in compensation of officials and the increase in the cost to the Government of the executive pay roll. At this time I would like to read a report concerning certain companies-companies that were selected from the returns received from one questionnaire, to show the trend in the increase of salaries for executives. In passing, I might say that I will have material on Friday to show, in connection with one aviation company, the increased number of employees and the increase as to the pay-roll cost for those employees. Mr. BATES. Are you going to read that report in toto or are you just going to read it as the chairman said, excerpts from it, the highlights? Mr. TOLAND. The report is short. I will read the whole thing. Compensation received by certain officers and others of companies which have or had direct ordnance contracts with the Navy Department for the 8-year period, 1934 to 1941, inclusive, showing the percentage increase of defense years as compared to predefense years (based on responses received through November 1, 1941, to questionnaire No. 12). In the preliminary report of the House Committee on Naval Affairs investigating the naval-defense program, attention was called to the small number of responses received to the naval ordnance contract questionnaire. The reason for so few responses was due to the fact that the questionnaire is of relatively recent date and the contractors had not had the opportunity to furnish the information requested. Since the publication of the preliminary report, however, a considerable number of responses to this questionnaire have been received and will be tabulated within the near future. In order to determine the advisability of making a comparative study of the influence of defense contracts on compensation received by officials of the companies having ordnance contracts with the Navy Department, responses received through November 1, questionnaire No. 12, were taken as an example. Of the 41 companies studied, there were the following 15 which supplied information in sufficient detail to be of much value in making the comparison of the increase of defense years over predefense years: American Zinc Smelting Co. and subsidiaries, Babcock & Wilcox Co., Bridgeport Brass Co., E. I. du Pont de Nemours & Co., Fulton Syphon Co., General Steel Castings Corporation, Heppenstall Co., Hevi Duty Electric Co., Kearney & Tucker Corporation, Keuffel & Esser Co., Landis Tool Co., Lansdowne Steel & Iron Co., Lodge & Shipley Machine Tool Co., New York Air Brake Co., Union Carbide & Carbon Corporation. A number of the companies made no attempt whatsoever to give the information requested and many others failed to state whether or not there were any bonuses paid in addition to salaries. One company, the Union Carbide & Carbon Corporation, reported total compensation paid officers of the company amounting to over $150,000 each for the three highest paid for the year 1940 (Jesse J. Ricks, director, president and general counsel; William F. Barrett, director, vice president and chairman of board; and Benjamin O'Shea, director and vice president), but failed to state the basic salary of these officers or the amount of bonuses paid for any of the years 1934-40. The compensation of two of these officers (Barrett and O'Shea) show over 100 percent increase in 1940 over 1934. Fourteen companies (all in previous list except Kearney & Tucker Corporation) showed a total compensation of $1,300,791 paid to officers in 1935 (a so-called depression year) as compared with $1,420,017 in 1937 (a nondepression year), an increase of $119,226 or 9.2 percent. The total compensation paid these same officials amounted to $1,269,985 in 1938, and $1,760,470 in 1940, an increase of $490,485 or 38.6 percent. While the salaries of officials increased tremendouly during the first year of the defense program, incomplete figures for 1941 indicate that there will be a much greater increase as the program progresses. An examination of the individual companies comprising the 15 selected as a sample showed a wide variation in the percent increase in compensation of individual officers. The percent increase during the period 1934-41 (using the first and last year for which complete information was furnished) range from approximately 22 percent increase to 1,331 percent (J. B. Armitage, chief engineer of Kearney & Tucker Corporation). While the latter, an extremely high percent increase, is an isolated case, the general trend has been a comparatively high percent of increase of compensation of executives of most of the companies. In fact, during this period there were 26 out of 41 officials receiving over 100 percent increase in compensation: Thomas McCroskey, manager R. E. Day, president and general manager_ H. W. Jones, vice president. J. V. Giesler, president-.-. R. B. Heppenstall, president... Percent 116 126 180 190 153 101 101 William F. Barrett, director, vice president, and chairman of board William L. Dolle, president. Fred Albrecht, vice president, treasurer.. Fred Schoeffler, works manager.. Benjamin O'Shea, director, vice president. L. W. Hayden, district agent.. J. L. Tucker, vice president.. Fourteen of the twenty-six received over 200 percent increase: Theodore Tucker, president.. O. W. Carpenter, Jr., secretary-treasurer. R. W. Burk, general sales manager.. J. B. Armitage, chief engineer_ H. E. D. Gray, general manager_ R. F. Ingram, secretary-sales manager. W. W. Howley, president.. 325 255 209 366 414 1, 331 270 213 575 W. W. Howley, vice president.. 575 The tremendous comparison increase in compensation paid officials, of course, cannot be attributed wholly to defense work, as the year 1934 was considered one of the depression years, yet there were a number of large increases in 1940 over 1938, the latter a so-called normal year of business. The salary changes during this period showed increases as high as 181 percent. It is interesting to note that the official receiving the 1,331-percent increase during the period 1934-41 (J. B. Armitage), received in 1934 a salary of only $6,517 as compared with the salary of $30,000 in 1941. The bonus received by this official increased from $6,765 in 1937 to $63,300 in 1941. Compensation received in 1941 was $93,300 as compared with $6,517 in 1934. The salary received in 1938 was $10,000 and the bonus, $15,000, making the total compensation, 1938, of $25,000 as compared with $93,300 in 1941. There were two other officials of the same company receiving the same identical salary and the same identical bonus in 1941 who did not receive any bonus or salary prior to 1938. While the 1934-41 period figures reflect the increases from a depression period to a defense period, it can be assumed that most of the increases, however, have actually been due to defense contracts. This is illustrated by making a comparison of compensation paid officials in 1938, a so-called normal year, with increases paid such officials in 1940, a so-called defense year, or the beginning of the defense period. The increase in compensation paid officials in 1940 over 1938 amounted to $518,240, or 38.1 percent. An attempt was made to compare the increase in salaries and bonuses of the various companies with the increase in Navy business which these companies received; however, it was found that there were only four companies that furnished sufficient information for such comparison. I offer the report I have just read in evidence, Mr. Chairman. (The report referred to was received in evidence and marked "Exhibit No. 79.") Mr. TOLAND. Now, I would like to make this further statement with regard to what Mr. Rivers said. In the course of our inquiry, we have encountered what are termed the so-called investment companies. As the preliminary report pointed out, 56 companies have received approximately 75 percent of the defense business. In addition, we have a complete list of every company that the Government has loaned any money to. Attention has been directed primarily, but not completely, to an examination of the affairs of those companies, the ones that the Government of the Uuited States has loaned money to, to see whether or not the Government is being protected in its investment. The inquiry has been whether or not investment under the tax amortization system is being charged off and whether or not the Government is paying twice for the original investment. When we conclude our investigation in the future, we will bring to the attention of the committee information regarding those companies. The CHAIRMAN. Let me ask you this question, Mr. Toland. Do you understand that these salaries you have spoken of may be taken as a deduction in computing the income subject to excess-profits tax? Mr. TOLAND. That is my understanding. The CHAIRMAN. Now, under this bill before us, under Treasury Decision 5000, it could not be done; not for the part of the salaries over $25,000. Mr. TOLAND. It is my understanding that Treasury Decision 5000 placed a ceiling of $25,000 on salaries of officials working on Government contracts. The decision permitted bonuses to the extent of 10 percent, but no higher. The CHAIRMAN. Thank you very much. Mr. JACOBSEN. Could I ask you a question, Mr. Toland? You have supervised the assembling of all of this information for the investigating committee: I am wondering if you at this time would |