Profit sharing

“ But profit-sharing, as a system, was ridiculous and impossible. Profit-sharing could be successful only in isolated cases in the midst of a system of industrial strife; for if all labor and all capital shared profits, the same conditions would obtain as did obtain when there was no profit-sharing. ”

“ Profit-sharing.—Some general system of preventing antipathy between profit-makers and wage-earners seems desirable. Certain interests are known to be mutual, and both employers and employed welcome any system by which those mutual interests can further the success of the business. ”

“ Nothing is to be gained, either from a scientific or a business point of view, by estimating indiscriminately, profit sharing, gain sharing, indeterminate bonus, labor insurance, stock holding by employés, percentage on sales, product sharing and similar forms. ”

“ Profit Sharing as a Step toward Industrial Harmony.—One of the ways suggested for ensuring to the workman his full share in the earnings of industry is known as profit sharing. The usual provision is that after the current rates of interest, wages, and salaries are paid the surplus earnings shall be divided between the employers and the workers on some fair basis determined in advance. But the amount which goes to the workers is not necessarily paid in cash. ”

“ While profit-sharing is paternalistic and is directed to an increase of production, co-operation may be said to be democratic, and to aim at a more equitable distribution. Under this plan the laborers hope to divert to themselves the large amount of profits which they now see going into the possession of their employers. By eliminating the manager or enterpriser they hope to save his profits for themselves. ”

“ Precisely the same objections that hold in all other employments to the wage system hold as well in domestic service. In other occupations it has been seen that the almost universal testimony of those who have tried profit sharing is that the system results in economy in the use of materials, care in the handling of machinery and implements of work, and a feeling of partnership, the spur of which as a motive “is only excelled in sharpness by complete proprietorship.” ”

“ Since men combine their capitals for the purpose of realizing profits, it would naturally be supposed that all partnership agreements would be specific on that point. Yet it very often happens that many contingencies relating to the matter of profit-sharing have not been foreseen and as a result disputes arise.
The fundamental principles governing profit distribution may be stated as follows:
1. Where the agreement is silent, the law provides that profits shall be divided equally among the partners regardless of the amounts of their respective investments of capital. ”

“ A fifth tendency is towards a realization of the fact that all who share in industrial processes should participate in the benefits resulting from their work, that “perpendicular” rather than “horizontal divisions” in labor should be the aim in all industry. This is seen in the various efforts made to introduce productive and distributive co-operation, profit sharing, and other measures intended to give employees a share in the results of their labors, and thus to take a personal interest in their work. ”

“ Whatever economy one devised was adopted by all. The business was most systematic and admirably managed in every detail, running as harmoniously as the different parts of a watch. Clerks, agents and employés who could save a few hundred dollars purchased Trust Certificates and thus became interested in the business and gains. If it is desirable to multiply the number who enjoy the profits of production, how can it be done better than through ownership of stock in industrial associations? The problem of co-operation and profit-sharing can be solved in this way. ”

“ Relation of the single tax to socialism. (Young, The Single Tax Movement in the United States, pages 307-312.)
CHAPTER XII PROFIT SHARING AND COÍPERATION A. PROFIT SHARING 110. THE NATURE OF PROFIT SHARING.—The essence of profit sharing is that the workmen in a given enterprise receive, in addition to their regular wages, a share in the profits which would ordinarily go entirely to the entrepreneur. The share going to the employees varies with the establishment, but generally from one quarter to three quarters of the profits are divided among them. ”

“ Even the theorists who once regarded profit-sharing as the universal panacea recognize to-day that profit-sharing constitutes a remedy in some cases only; that the labouring classes are not, as a whole, either patient, or painstaking enough to fulfil the very simple conditions that profit-sharing demands. ”

“ While certain forms of the system have been legislated out of existence in some states, friends of the plan claim that it is a true profit-sharing method which "blesses both him that gives and him that takes"; and that it is an advanced and legitimate means of promoting business, when properly conducted. ”

“ Profit-sharing would not work, because it is impossible to share profits with those who are incapable of sharing losses. Communities have been formed, the object being to pay the expenses and share the profits among all the persons belonging to the society. ”

“ Some progress in this latter direction is being made, there being a tendency to improve upon simple profit-sharing by capitalizing the workman’s “bonus,” whereby he becomes a shareholder, and the business is gradually modified in a co-operative direction. There are remarkable instances of such modification abroad, notably that of the great iron foundry and Familistère at Guise in France. ”

“ After a short period of suspicion on the part of the men, and doubt on the part of the employers, both parties seemed to be converted to the advantages of profit sharing, a sanguine report of their experience was made by a member of the firm to the Social Science Association in 1868, sums between one and six thousand pounds were divided yearly among the employees, while the percentage of profits to the owners rose to as much as eighteen per cent. ”

“ Some partners may have made no investments of money or property, setting up their particular skill and aptitude or standing in the community as their share and contribution to the profit-earning capacity of the organization. ”

“ Instead of exacting profit from the producer and the consumer, conduct business for the purpose of establishing equitable relations between the producers and the consumers. When this is done the profit system will have been removed and equity will bring abundance to the household of every producer, and poverty will be abolished. ”

“ This lies at the foundation of the prosperity of every permanently prosperous community. It is the source of wealth. I think, therefore, we ought to encourage home industry. We ought to co operate together, if there is any kind of business in which there is a profit, let us operate together and have the benefit of that profit among ourselves, instead of giving it to strangers. Why should we encourage the stranger to come here and import wagons to sell to us when we have got the brains and the money to sustain that business among ourselves? ”

“ At present we are selling our labour to the highest bidder, and in the process we are selling our souls along with our bodies. Each industry will conduct its own business, not for profit but for social service; no shareholders will live on our labour ”

“ It is true that selling to the public is not practised by all co-operative societies, and is even generally dis- couraged, as we shall see. But, even though the society sells only to its members, the system of selling at cost price has another drawback, namely, it tempts certain members to buy goods for their friends and neighbours, and even perhaps to make a profit thereby as middlemen. ”

“ By this means many were enabled to exchange a precarious profit for a permanent income. In cases of this kind, [Pg 310] the merchant was benefited by securing a guarantee against bankruptcy and the organized consumers by securing the services of the necessary business talent to establish Equity in Distribution, by paying equal dividends out of the net income to all regular customers. ”

“ On one side of you stand the contributors to the vast treasure of knowledge that mankind has accumulated, and is accumulating—men who have, in general, labored without fee or reward; on the other side of you stand the owners of this vast treasure, desirous to have it fashioned in a manner to suit their various tastes and powers, that all may be enabled to profit by its possession. Between them stand yourselves, middlemen between the producers and the consumers. ”

“ What first prompted me to this endeavour was my sense of the unsatisfactory way in which economists found separate “laws” to express rent, interest, profit, wages. In actual economic processes all the factors of production were required to co-operate, and that co-operation was an organic process which precluded the separate assignment of any part of the products to any one of them. Different kinds and quantities of land, capital, labour were needed for each of these acts of co-operative production. ”

“ True co-operation precludes dividends, profits, or interest. True co-operation is that form of laboring where each works with the other for mutual benefit, but not for mutual plunder; where each gets the full equivalent of what he produces; and where each sells his surplus product for its real worth—that if to say, that he sells it for just what it costs him in labor, receiving in exchange the equivalent in what it cost another in labor for his commodity. ”

“ The producer cooperative seeks to return to its members the largest possible portion of the dollar necessarily spent by the consumer for the product with deductions only for modest distribution costs, without profit to the membership cooperative and with limited profit to the stock cooperative. ”

“ The nation is to be considered a partnership, the several members engaged in the various departments of business, and producing annually products of the value of $3,900,000,000, which are distributed among the partners, affording to each a certain share of profit. ”

“ We must recognise that it is the application of this rule which has ensured the successful development of consumers' societies, since it gives to each member a reward proportionate to his co-operative zeal, to his loyalty to his shop. Besides, it is founded on one of the most certain of economic laws, the law that the success of a business enter- prise depends less on its capital than on its customers. It is therefore just that the profits should belong to those who by their acts ensure the prosperity of the society. ”

“ The consumers’ theory maintains that all profit on price is abstracted from the consumer, and must be returned to him; while to him should also belong all capital and control, subject to such regulations as the state and the trade unions enforce. This theory is fully exemplified in the English Wholesale Society, and in some of the smaller federations for production, which employ workmen, whether co-operators or not, for wages only, and admit no individual, but only co-operative societies, to membership. ”

“ There is, from the outset, one defect in the coöperation between buyer and seller, employer and laborer. The coöperation is largely unintended. Each is primarily thinking of his own advantage, rather than that of the other, or of the social whole; he is seeking it in terms of money, which as a material object must be in the pocket of one party or of the other, and is not, like friendship or beauty, sharable. Mutual benefit is the result of exchange—it need not be the motive. ”

“ The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great end and principal object. ”

“ In addition to this personal, human relationship, capital might and should, in all justice and humanity, identify the pecuniary interests of labor with its own interests. What is known as industrial partnership is simply a solution of this branch of the problem. The principle is simply that of giving labor a pecuniary interest in the profits of the establishment pro rata with his own wages. A bonus is set on frugality and industry and conscientiousness of work by making the hands small partners in the concern. ”

“ Inasmuch as all material wealth was created by labor, and distributed by being bought and sold, it followed as a logical sequence, that there was but one way by which every useful worker could secure a just share in the distribution, and that was to take charge of the business of exchange (buying and selling) and divide the benefits equally among all who united their efforts to establish the largest possible round of exchange between producers and consumers. ”

“ Here, too, is joint venture on the part of the Community just as much as on the part of Labor, Capital, or Management. What is 99 per cent. of the expenditure of government in normal times but outlays in the nature of investment in industry: investment in property and services of one kind or another, which alone makes possible the vast co-operation and co-ordination of effort which is the very life-blood of industry? The vaster industrial organization becomes, the more it depends, in a multitude of directions, upon the investments of the Community. ”

“ As an example of a co-partnership industry which divides all surplus profits that may remain after 5 per cent. has been paid on capital between custom and labor, one pound of purchase counting for as much in the division as one pound of wage, let me refer to the well-known Hebden Bridge Fustian Works. I commend to all interested in co-partnership questions a close study of this industry. Started by working men in 1870, it has built up on lines of permanent success a flourishing business, and is making sufficient profits to enable it to divide 9d. ”