672 



PROFIT-SHARING. 



A publishing house in Chicago has tried the 

 profit-sharing system for several years. About 

 twelve years ago, when the capital stock of the 

 firm was $200,000, it induced its foreman and 

 heads of departments to buy 5 shares of stock 

 at par, to be paid for at the rate of not less than 

 $1 a week. Notes bearing 6 per cent, interest 

 were accepted when the employe did not wish to 

 pay in cash. A block of 5 shares more could be 

 purchased at par whenever the first block had 

 been paid for. As the stock advanced in value, 

 all availed themselves of the option. Eight 

 years ago, when the capital stock of this house 

 was increased to $1,000,000, the oldest and most 

 faithful workmen were taken in as partners 

 that is, allowed to buy stock to the aggregate 

 amount of 1,000 shares. Out of a total force of 

 600 men, about 50 have already become partners. 

 The results to the firm are great prosperity, 

 largely due to increased zeal and activity among 

 stockholding employes, greater permanency, and 

 a more watchf ul care to prevent waste of material 

 and of time on the part of non-shareholders. 

 The results to the employes are increased thrift, 

 economy, and sobriety, and a greatly increased 

 self-respect ; also profits to the original 10-share 

 stockholders amounting to 60 per cent, per an- 

 num, so that many of them have become property- 

 owners worth from $20,000 to $50,000 ; and 12 

 per cent, annual profit to the later shareholders, 

 so that many of these are now worth from $10,- 

 000 to $20,000. Their co-operative stock is above 

 par ; but, of course, after they had made the first 

 thousand dollars, other profitable investments 

 helped to swell their fortunes. 



An enterprise similar to the old whaling system 

 of profit-sharing was entered into by the menha- 

 den fishermen of New Jersey in 1889. A firm of 

 tin makers in Chicago has declared a dividend 

 of 7'7 per cent, upon earnings, and a manufact- 

 uring company of St. Louis 5 per cent. The 

 stockholders of the Toledo, Ann Arbor and 

 Northern Railroad have informed their men that 

 in any dividend year each of them (except the 

 president) who has been five years employed shall 

 receive a dividend upon his wages just as though 

 his total year's earnings were so much stock. 

 The workmen of Proctor & Gamble, soap-makers, 

 of Cincinnati, have accepted a proposal that prof- 

 its above interest on capital shall form a surplus 

 fund, to be divided between employers and em- 

 ployed in the proportion of capital invested to 

 wages earned. Pillsbury & Co., of Minneapolis, 

 the largest milling firm in the West, have made 

 a division of $40,000 among their employes, in 

 pursuance of a profit-sharing plan adopted four 

 years ago. For two years no money has been 

 divided, but the past year has been profitable 

 and the firm kept its promises. Profit-sharing 

 in Minneapolis has raised the cooper from a 

 wandering mechanic to an important factor in 

 that busy community, 



Of course, failure has attended many experi- 

 ments in profit-sharing. A notable instance was 

 that of a maker of furniture in Albany, N. Y. 

 The profits were to be divided at the end of six 

 months, one fourth going to the proprietor and 

 the remainder to be apportioned among the men. 

 But before the division was made the proprietor 

 deducted from the profits the running expenses 

 of the factory and the interest on the capital in- 



vested, leaving only the net profits. During 

 the six months the men received 90 per cent, of 

 their former pay, the remaining 10 per cent, 

 being held back. No account was taken of this 

 deduction, and it did not appear again until the 

 end of the six months, when it appeared in the 

 net profits. This plan differed from the usual 

 co-operative system in that the latter deducts 

 nothing from the wages of the men, but gives 

 them only 25 per cent, of the profits, while the 

 manufacturer receives 75 per cent. By this plan 

 the proprietor received 25 per cent, of the deduc- 

 tion from the men's wages, while they received 

 75 per cent, of the profits of his business. 



It is evident, from the instances given above, 

 that there are three general types of co-operation, 

 or profit-sharing, in manufacturing. The first of 

 these is strictly co-operative, no wages being paid, 

 the gross profits being divided upon some agreed 

 plan between proprietors and employes. The 

 result of this plan has almost invariably been 

 failure. Employes like to share in the profits, 

 but they want a certainty of weekly or monthly 

 wages as a basis. The second plan is to have the 

 employes hold stock, and receive the same wages 

 that are paid in non-co-operative institutions for 

 the same work. This plan has obvious advan- 

 tages over the first, and has been successfully 

 carried out in numerous instances. The stock 

 owned by the employes was in some cases pur- 

 chased outright ; in others, paid for gradually 

 out of weekly earnings ; and m others, acquired 

 by the application of profits voluntarily assigned 

 to them by employers. The third plan is to di- 

 vide among employes a certain percentage of the 

 profits in proportion to the wages earned. This 

 is the simplest plan, and the one generally 

 adopted. It enables employers to retain full 

 and unquestioned control of their business, and 

 when carried out in good faith assures a division 

 of actual profits between the labor and the capi- 

 tal employed. Substantially this plan is in 

 operation in many establishments in this coun- 

 try and Europe, although no two of them, per- 

 haps, are precisely alike. As such an agreement 

 would necessarily be terminated if a strike oc- 

 curred, strikes are rarely indulged in ; and as 

 the employes are vitally interested in making the 

 profits as large as possible, they work with 

 greater care and cheerfulness. Some employers 

 who have adopted this plan claim that their prof- 

 its are increased instead of diminished by the 

 division of profits, owing to the better quality 

 and amount of work secured. No one plan, 

 however, can be successfully applied to all kinds 

 of manufacturing business. An unprofitable 

 year is the test of profit-sharing, because it shows 

 whether the worker is willing to be debited for 

 the losses. An instance is known of a concern 

 where a large number of the workmen were 

 small holders of stock. A bad season made it 

 necessary to make an outlay of about $25,000 for 

 improved machinery in order to meet competi- 

 tors. There was only one way to provide for it, 

 and this was by assessment of the stockholders. 

 The small holders could not see that the invest- 

 ment of further money was for their benefit. 

 Some of them raised the cry of robbery ; and the 

 result was that, in order to save the business, 

 many of them were bought out. They would 

 have made money if they hfad remained in, but 



