Grace became vice president in 1911, and five years later, at age 39, president of the corporation. His aims were administrative efficiency, a managerial structure that was taut and intricate, and loyalty to the company. He wanted his managers to consider Bethlehem Steel a career, not just a job, so he rewarded the good ones with transfers and promotions. ''When there is a management position open,'' he told an interviewer, ''it is filled by selecting a man who is already working for the company and well-steeped in its practices and philosophies.''
In 1922, he set up the ''Loop Course,'' the company's management training program that acquainted college graduates with every facet of the operation. The name derived from the trainees' working in a loop through the plant, with about a week in each department. Each man would be on his own schedule, but there was much criss-crossing and fraternization. In keeping with Grace's emphasis on health and fitness, the 150 men chosen each year not only had to show promise, they had to have good physiques.
Grace continued Schwab's wage incentive system, which rewarded workers who performed better than expected. In the 1930s, he started a public relations campaign to promote the company.
But he was less forward-thinking in other matters and acted in ways that didn't serve the company well in later years. Like Schwab, Grace had no interest in hiring anyone but steel men, leaving the top ranks dominated by executives who had little business experience outside the industry. The board of directors, too, continued to be run by insiders. And even though the company had enormous resources, Grace discouraged pure research. Both he and Schwab brushed off inventors and tinkerers.
Except for the innovative Grey beam, Bethlehem followed Andrew Carnegie's dictum, ''Pioneering don't pay.'' In the mid-1920s, Schwab and Grace spurned a technological breakthrough, a superior but expensive technique for rolling quality steel up to 3 feet wide and less than a quarter inch thick. This was the continuous hot-strip mill, first installed by the American Rolling Mill Co., later Armco, in 1924 in Ashland, Ky. It was a more revolutionary development than the Grey mill, because it provided sheet steel for a bigger product line the auto, appliance, container and construction industries. Until now, sheet steel was made at individual mill stands each run by millhands. With the hot-strip mill, that method was antiquated. Bethlehem had to scrap a large hand-sheet mill it was building at Sparrows Point, because it couldn't have competed with the hot-strip mill.
When Bethlehem opened a research department in 1926, it was mainly devoted to practical matters aimed at keeping costs down. The kind of inventiveness that tickled Grace was finding a way to make lubricating oil last longer.
Chairman Schwab rewarded Grace generously for making Bethlehem's far-flung enterprises gel. Grace became the highest-paid corporate executive in America, with average annual earnings of $600,000 over 20 years beginning in 1918. Even Elbert Gary, chairman of mammoth U.S. Steel, never made more than $500,000.
When Grace got $1.6 million in bonuses for 1929, on top of his $12,000 salary, incredulous Bethlehem stockholders protested. They didn't know how much he was getting until it came to light during the 1930 court fight over Bethlehem's attempted takeover of the Youngstown Sheet & Tube Co. Youngstown stockholders won their fight to prevent the merger in part by claiming Bethlehem had kept Grace's bonuses a secret from their directors. Later, Bethlehem stockholders stripped Schwab of his control over the bonus system.
As Schwab struggled with poor health and finances, Grace stood by him. The ''Steel King'' got $250,000 a year even though he wasn't doing anything for the company. ''There was no sum in my judgment that you could have paid Mr. Schwab that would have adequately paid him for his leadership, devotion and financial risks that he took for the development of Bethlehem,'' Grace said at the American Iron and Steel Institute.
During a heated stockholders' meeting in 1937, Grace shouted at two dissident investors who said Schwab had ''outlived his usefulness.'' Grace had to be restrained from attacking them. After Schwab's death in 1939, Grace scrambled to have the company cover his debts, not wanting his old master's name sullied.
He was equally intense on the golf course at the Saucon Valley Country Club an office away from the office for Bethlehem Steel executives. A superb golfer within two years of taking up the sport, he was the prime mover behind the founding of the club. It opened as an 18-hole golf course in 1922, with tennis courts, a swimming pool and a clubhouse. In 1951, he enticed the U.S. Golf Association to hold its 51st Amateur Championship on Saucon Valley's links, known as the Saucon Course. Also that year, work began on another 18 holes that would be called the Grace Course.
Stewart S. Cort, who would become Bethlehem Steel's chief executive in 1970, got an early taste of Grace's sober approach to the links. As a teenager in the late 1920s, Cort, a fine golfer and the son of steelmaking operations head Stewart J. Cort, showed up at Saucon Valley one day and asked Grace if he could be part of his foursome. According to the story the younger Cort later told Bethlehem Steel speechwriter John F. Heinz, Grace glowered at him and said, ''Cort, I hope you can hit 'em long and straight.''
''Well, Mr. Grace, I hit 'em long, but not always straight,'' the teenager replied. Grace, who liked to golf with better players as a way to improve his scores, dismissed the teen with the words, ''Learn to hit 'em straight before you play with us.''
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