Swope Hits Publication of Executives' Salary Figures

Gerard Swope, former president of the General Electric Company, writing on "Some Aspects of Corporate Management" in the spring number of the Harvard Business Review, has taken a firm stand against making the figures of executives' salaries public. In his article, the keynote of which is "the responsibility of business and society to each other," Swope asks "What conclusions about business organization can we draw from the experience of the last quarter century?" His answer covers matters related to stockholders, directors, and officers alike.

"The great majority of the stockholders in many corporations) have only the haziest ideas about the functioning of the board or of the operating officers, and generally even those hazy ideas are strong. The principal duty of the stock-holders . . . is to elect to the board of directors men (who are) intelligent, honest and (who have) a keen sense of their responsibility as trustees for the stock-holders and for the public policy of the company," Swope pointed out.

Swope states that he himself prefers form of corporate organization "in which the members of the board are stockholders but not in any sense controlling stockholders," as opposed to the form in which "(the) directors . . . devote all their time to the operation of the business (and) undoubtedly know it well."

Directors of a company should be stockholders, Swope continues, saying that "Many hold that a man with no financial stake in the company is in a more disinterested position than one whose capital is at risk."

With regard to the compensation of executives, Swope remarks that ". . . the compensation of officers and of the leading men in the organization . . . should be in the form of salary plus a share in the profits of the company." He goes on to comment that "There is no real or valid reason . . . why any salary other than the president's and possibly the chairman's should be made public. When the officers (of large companies) all know each other . . . (this practice) only produces envy and impairs the morale of the organization . . ."

"I do not see any objection to a statement showing the aggregate salaries of the directors and officers. . . If it went a step further and showed the percentage relation of the total salaries to total sales or total not profits, the stockholders might have some yardstick to measure the efficiency and economy of the company's administration."