Woolen Suit

In 1930 William Bishop Warner and Lionel J. Noah did not become masters of American Woolen Co. for love of the woolen business, for a desire for higher salaries, or even for the honor of running (he biggest woolen company in the U. S. Mr. Warner, an expert on merchandising and style promotion, had a good salary and plenty of honor as president of McCall Corp. Mr. Noah was said to be getting $50,000 as vice president of Gimbel Bros., Philadelphia. The thing that clinched their bargain with American Woolen was the right to collect a bonus of from 22% to 6% of all net profits over $2,000,000. This request the company was delighted to grant. It had lost so much money in the preceding three years that the stockholders had actually thought of giving up.

Mr. Warner became chairman of the executive committee at a salary of $30,000, Mr. Noah president at $100,000. Neither of them had ever run a woolen mill. They had to get along on their salaries alone the first year when American Woolen lost $2,800,000 and the second year when it lost $7,200,000. But profits for the third year (1933) were $7,053,000. Mr. Warner collected $170,000 in bonuses, Mr. Noah $273,000. They were sorely disappointed when American Woolen flopped back into the red in 1934. But they were not nearly as disappointed as the stockholders who, having tasted the blood of profits, wanted more & more. They openly accused President Noah of not taking the trouble to visit the mills he was closing down and selling out, Mr. Warner of being too busy working for McCall's to pay much attention to American Woolen. At stockholders' meetings the bonus scheme was angrily denounced. Last week these grumblings culminated in a suit filed in Manhattan's Supreme Court by one Albert Lautman, a stockholder, who sought to force Messrs. Noah and Warner to return to the company all of their 1933 bonuses in excess of "just and reasonable compensation" for their services.

Since Messrs. Noah and Warner moved into American Woolen, management costs have been cut $5,000,000, unprofitable plants sold, bonds and preferred stock retired, plant values written down to save taxes. But they are taking no chances with disgruntled stockholders. Last week it was disclosed that they had voluntarily abandoned their bonus scheme.

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