The labor standard., 1919-10-01
PROFIT SHARING, OR THE
 WORKERS FULL SHARE
George w. Perkins, Capitalist and Former
 Member of the "House of J. P. Morgan,
 Outlines What He Believes to Be Correct Plan-Why Some Profit Sharing Plans Fail


 r In the past, the man who was no l educated or trained to think inde
 pendently struck because he wanted 5 $2 day if he was only getting $1.75 ? and for quite a period labor differ 7 ences were settled on this basis. , believe that we are rapidly passing out of that period, for our laborine } people are so we'll educated and SC
 able to think independently that, 1T many cases, they are no longer strik- l ing for definite increase in wages but for what they regard as a faire1 proportion of the profits of the busi- ness in which they are engaged. If am right about this, then we are l rapidly leaving behind the period FWhen labor disputes could be settled Ehy a mere increase in wages and are entering the period when profit shar- ing in some form must be practiced Therefore, the question is, how can it be practiced effectively?
 Outline of Correct Profit-Sharing
 Plan
 A good many years of actual ex- perience have made me very optinis- worked out along the following lines
 First: Every business has, first of all, to earn operating expenses, de- preciation, and fair returns on honest capitalization.
 Second: believe that every busi- ness should consider that the compen- sation paid employees is for the pur- pose of earning a sum of money suffi- cient to pay the above mentioned items.
 Third: believe that any profits over and above such sum should, on some percentage basis, be divided be- tween the capital used in the business and the employees engaged in the busi- ness.
 Fourth: I believe that in neither case should these profits be immedi- ately withdrawn from the business; that they should be left in the busi- ness for a reasonable length of time, to protect and increase it's financial strength and safety; that, in the case of capital, it's share of these profits should be carried to surplus; that, in the case of employees, their share of these profits should be distributed to them in some form of security repre- senting an interest in the business, and that each employe should be re- quired to hold such security for a req sonable length of time, say three to five years.
 Fifth: I believe that the employees share of these profits should be allott- ed to them as nearly as possible on the basis of the compensation they re- ceive. Up to date, this has proved to be the best method. Results Attained By Proper Plan
 Now, let us see what such plan means: In the first place, it means that under such an arrangement each in the business. He is on the same footing as the financial partners, for if the concern is a partnership with, say, four or five members, the part ners themselves are drawing out each year what, in a way might be called salaries, viz, approximately the amount of money necessary to meet their general living expenses, leaving their surplus profits in the business. Any partnership or any sharing plan that divided up the profits and withdrew them in cash at the end of every year could not last very long. Why Some Proft-Sharing Plans Fail
 Many profit-sharing plans have divided profits with employees on a cash basis and turned the money over once year. The result has been that | if man earning $1,O00 a year re- ceived $2O0 at the end of the year from proft-sharing plan, he prompt ly lifted his living expenses from a $1,OOO basis to a 1,2OO basis, and be- gan to look upon his income as $1 200 rather than $1 ,OOO, and the extra $20O did little to increase his activity and efficiency, or to promote his intellect ual efforts in the business concerned. Then, if a period came when business wass dull or poor and he did not get | the extra $20O, he found fault with the owners of the business and be- came grouchy and inclined to lose in- terest in his work. If he did not use | the $200 for his living expenses, he probably invested it in a suburban lot or in some stock that was recommend ed to him, or in something that he knew little or nothing about. Then if his investment began to go wrong, he worried about it, and part of the time which he was being paid to devote to the business in which he was engaged would be expended in worrying about his investment in the business in which he was not engaged; whereas, if his money were invested in the busi- ness in which he was engaged, his de- sire to see his investment succeed and bring him further profits would be converted into efforts that would be of some practical benefit, not only to himself, but to the stockholders and his co-workers. In short, little real substantial benefit comes from a profit sharing plan where the profits are paid out in cash, except perhaps where man uses the money toward buying a home. There is, therefore, a serious weakness somewhere in such a plan, and the weakness lies in the fact that profit sharing cannot be really beneficial, either for employer or employe, unless conducted on a partnership basis and coupled with profit saving.
 Looking at it from the viewpoint of capital, the object to be accomplished through the adoption of profit sharing is added interest in the business on the part of employees, which in turn brings higher efficiency. Looking at it from the standpoint of the employe, the object to be accomplished is a fairer remuneration for services ren- dered. Therefore, any profit-sharing nlan that fails to accomplish both of |