THE EFFECT OF HIGH TAX RATES ON EXECUTIVE INCENTIVE by Crawford H. Greenewalt I was glad to accept the invitation of your committee to present nw views as to the probable impact of high personal taxation on the future of business enterprise. It is encouraging to me to see a committee of the Congress inquiring into this subject, for I am convinced that it is an area of extraordinary importance to national growth and prosperity.
Inasmuch as my views are not wholly based on demonstrable evidence, and must rest to some extent on opinion, I should first define the bounds of my competence. I am not an authority on taxation, and I have no technical qualifications either for defending or for deprecating any particular method of tax assessment.
Neither am I an expert on budgetary matters, and so I cannot suggest how much it is wise, or desirable, or necessary, for our Government to spend. The views I shall express are those of an executive who must face the very practical problems involved in the operation of a large corporation. These, of course, embrace the present, and the usual problems of customer, employee, and stockholder relations. In a much more important sense, however, they are problems of the future and comprise, insofar as possible, the development of policies and practices which will insure continuing effective performance well beyond present horizons.
One of our difficulties arises out of the realization that governmental expenditures will remain very high for a considerable period, even with maximum emphasis on economy, and that the tax burden on our people will be correspondingly large by previous standards. If this were not the case, the question of executive incentives would hardly be an issue of importance.
As our country has developed and matured, we have become increasingly dependent on an active and dynamic industry for our economic growth and prosperity. Without minimizing in the slightest the important contributions to our national economy made by the farmers, the professions, the service trades, the fact is that our standard of living is firmly anchored to our industrial development.
Since this is so, it follows that how business and industry fare must be a matter of great importance to all Americans. Their standard of living, their future well-being, are vitally dependent upon an American industry that continues to be dynamic, resourceful, and progressive. This desirable state of affairs can continue only so long as industry can compete successfully for the limited supply of talented people. For an industrial corporation is not a machine that can be run by automation. It is a team of human beings that must have first-class direction by intelligent and able management. And if we have learned one fundamental truth in industry, it is that first-class performance can never come from second-class performers.
It is not an exaggeration to say that the success of any business enterprise will depend very substantially upon the caliber and character of its management group. I have thought a good bit about the personal characteristics that lead to managerial competence, for selection of outstanding people is my most important single responsibility. The best I can do is to define an executive as one with the ability to blend men with a great variety of essential technical talents into a harmonious and well-knit ensemble. The analogy with the conductor of a great orchestra might be used, but the executive has a tougher job, since we have no Beethovens or Mozarts in the business world to provide us with a score that we can follow.
But whatever definition or analogy one wishes to use, I am quite sure that the competent executive is a rare bird—and is found only by combing through large numbers of eager candidates.
His job also becomes more and more difficult as time passes and our industrial technology becomes still more complex. The executive of the next generation must inevitably be a better man than his predecessor, just as managerial competence has grown from its position a generation ago.