CONTROLS: Miniwar Over Dividends

Florida Telephone Corp. is hardly the largest of the nation's 1,840 "independent" (non-Bell) telephone companies. But it is certainly the most independent. While almost all the nation's corporations complied with President Nixon's request that they hold dividends down to pre-Aug. 15 levels, the $20 million-a-year central Florida utility refused.

It was not so much a question of money; the company increased its quarterly payout from 13¢ to 14¢, or a total of only $46,000 on all outstanding shares. Rather, as Florida Telephone President Max Wettstein told a four-man board at the Cost of Living Council in Washington last week, it was a question of principle—and sound business practice. The company needs uninterrupted dividend growth, he explained, in order to attract new capital for its construction program. Besides, Wettstein pointed out, President Nixon does not have congressional authority to freeze dividends, and the 10 increase cannot legally be rescinded.

Perhaps not, but last week the Administration persuaded three other small firms that had posted higher dividends to pare back their next regular payouts. Executives of the firms—Wisconsin's Briggs & Stratton Corp., Illinois' Martin Yale Industries, and Pennsylvania's Selas Corp.—were brought before the COLC at the same time as Wettstein. Paul McCracken, the council's vice chairman, ordered the gathering after the COLC staff saw reports of dividend increases in the press. Arnold Weber, executive director of the council, seated the businessmen around a table at the COLC's Washington headquarters and asked them to lower their next dividend in order to offset the latest increases. All except Wettstein agreed to recommend the action at their next board meetings.

Powerful Persuaders. Nixon's call for dividend restraint has doubtful economic value. Because dividends are paid out of profits already earned, they do not raise production costs as wage increases do, and thus are not translated into higher prices. Some businessmen suspect that the President's concern with dividends is intended to stem criticism that his recent economic moves are weighted in favor of business. Dividend jawboning will probably be aimed at relatively small firms. Five have been selected for gentle pressure in the next few weeks. Large companies are too visible to get away with a dividend rise, and only small ones can afford to be daring or, as in the case of Florida Telephone's Wettstein, stubborn.

The Administration has some powerful persuaders. For example, the Federal Communications Commission must approve all rate increases for public utilities like Florida Telephone. And the Internal Revenue Service can always give extra-close scrutiny to the tax returns of companies that refuse to go along with the President's economic policies. Wettstein may be getting the message. At week's end Florida Telephone officers announced a special meeting of company directors in "the near future" to discuss the next quarterly dividend.