"Money Isn't Everything"

The board of directors of Diana Stores Corp. last week got an unusual shock. Diana's president, Harry Greenburg, turned down a bonus of $450,000. And he did not do it because of sky-high taxes.

The taxes, said Harry Greenburg, would be moderate: he would have to pay only capital gains. In 1944, when industrial bigwigs were setting up their own incentive plans through stock options, Harry Greenburg got warrants from Diana Stores to buy 20,000 shares of the company's stock at $7 a share. As the stock has since been split, 4-for-1, Greenburg could buy 80,000 shares at $1.75 a share. The market value of the stock last week was $7.50. Harry Greenburg could simply sell the 80,000 shares for $600,000 and take his profit.

The warrants were bought before the U.S. Supreme Court had .ruled (in 1945) that the profits on such stock warrants or options were taxable as income, so Greenburg would have to pay only a 25% capital-gains tax. (He had a letter from the Commissioner of Internal Revenue affirming this.) That would net him a profit of $450,000 after taxes.

Why had he turned it down? Said Greenburg: "I feel that the interests of both the corporation and the stockholders will best be served by ... [eliminating] the possibility of earnings dilution."

Harry Greenburg, 50, had started Diana Stores, a chain of low-priced women's-wear shops, with two stores in 1938. Now his corporation owns 67 shops scattered throughout the South. Last year its sales were nearly $13 million (net income: close to $1 million).

Greenburg, who with his wife owns about 23% of Diana Stores stock, attributes much of the swift rise of the company to his shrewd "good will" campaign. This calls for local store managers to hire local help, join Chambers of Commerce, become minor pillars in their respective communities. Harry Greenburg thought the best way to show his stockholders that his good will was more than skin deep was to turn down his stock options. Said Greenburg: "Money isn't everything in the world. I won't eat any more than I'm eating now if I exercise my stock rights."

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