Evening star., 1937-12-05
Profit Sharing
BY FREDERIC J. HASKIN.

Profits in business now appearing again
have also added to a revival of the sub
ject. Profit-sharing plans, while prac-
ticed in the United States for many years,
have been practically inactive since 1929
due to recession Of business.
Public enterprise has always been d.
vided in its opinion Of profit sharing,
and more widely Is 1t divided on the
matter of policy. The majority of busi-
ness men believe that profits are the
reward for risklng the capital in ,ested
in the enterprise and that consequently,
profits belong completely and exclusively
to owners of that capital. A minority
hold opinion that while capital has first
claim on profits, workers with years Of
faithful and intelligent service are en-
titled to something more than regular
compensation. Others believe that profit
sharing is sound business policy and
that the hope of extra reward serves as a
stimulus toward greater effort and more
efficiency.
Putting into practical operation any OF
these ideas has not been a happy ex-
perience with most enterprises that have
undertaken some form of profit sharing.
In most instances workers have regarded
sharing OF profits as part OF their pay,
and apparently are satisfied while profits
are available, but in times when profits
are not made and cannot be divided. dis
satisfaction has been the unfortunate
result.
The country's first known attempt to
operate a profit-sharing plan was in
1894 when Albert Gallatin, Secretary of
the Treasury under Presidents Jefferson
and Madison, tried out such plan in
his glass works in Pennsylvania. Horace
Greeley at the time of his connection
with the New York Tribune had profit
sharing plan, which included a few of
his most valuable associates. Brewster
and Company, New York carriage build
ers, started a profit-sharing plan for its
employees in 1869 which lasted only until
1871 when strike convinced the man.
agement that the plan was not appreci-
ated by the employees and was discon-
tinued.
Many other companies during the
period of 1880 to 1890 started some form
of profit-sharing plan, but the first
proft-sharing plan to last more than ten
years appears to have been that of the
Peace Dale Manufacturing Company of
Peace Dale, Rhode Island, a company
manufacturing worsted goods and woolen
fabrics and employing approximately 500
years, but was discontinued for various
reasons. The N. o. Nelson Company of
st. Louis started a profit-sharing plan
in 1886, which was carried out for forty
eight years without interruption, being
discontinued because of unsatisfactory
results.
1t was not until after the World War
that profit sharing first came to general
notice. Then profits were high and
owners and managers could afford to be
generous. A profit-sharing plan of some
type was inaugurated by large per cent
of industries over a period of five years,
but after that time interest in the move
ment lessened. fewer companies adopting
such plans, while large number discon-
tinued plans that had been adopted.
There are two general plans Of profit
sharing-one with executives and the
other with employees other than admin
istrative The idea behind sharing with
executives is to help create a personal
interest in company affairs. thus elm
mating all possible waste, and enlisting
each official in an efficiency program;
also to compensate executives according
to performance rather than for time de-
primary motive for a profit sharing plan
is to increase morale, good will and to
prevent faithful and valuable workers
from leaving their posts for other op-
| portunitles.
| In 1916 the United States Department
| of Labor made the first worth while
| survey of profit sharing. Some form of
| profit sharing was then found in so COM
! panies. The National Industrial Con-
| ference Board undertook a study of the
subject in 1920 and new survey In 1927.
! In the latter study 1855 industries were
canyassed, 1877 of these reporting some
| type OF profit sharing with employees. at
| that time indicating that the movement
| was gaining ground. Surveys made since
| 1927 have been Of no great value due to
rapid changes in business since that time.
But while the mortality rate in profit
sharing plans continues high. many en-
| terprises are experimenting with the idea,
and it Is now believed the number of
| plans in active operation is larger than
the high peak of 1920 to 1925.
Interest in the subject of profit sharing
| has shifted in recent years from the urge
| to start plans to a study of causes for
| plans being abandoned or discontinued.
Reason for success or failure, especially
those in operation for a number of years,
has engaged much thought In a study
| OF lit instances of abandoned plans,
companies going out of business ac-
counted for %; unsatisfactory, 16: mer-
| gers and reorganizationS, IA; lack OF
stimulus, 8, and the remainder for vari-
Gus reasons, or no reason stated.
Experience has shown that the under
lying purpose for establishing Of any
| profit-sharing plan usually determines
its success or failure Plans started for
| the purpose of adjusting compensation
have invariably proved success. Profit
sharing plans as reward for effort when
all employees are included have not
| proved satisfactory. When such plans
have been limited to executives, satisfac-
tion has invariably been the result. In
study of "a plans started for the purpose
of increasing efficiency, IA were discon-
tinued because of failure in their purpose.
In a survey of 48 profit sharing plans
adopted to improve morale, 26 were dis
continued because of unsatisfactory re-
| suits.
| Plans started for the purpose of thrift
have met with high degree OF success
| and have lasted longer than other plans.
| Such plan was started in 1916 by the
| late Julius Rosenwald for the benefit of
employees of Sears, Roebuck & Company.
| This plan, still in operation, provides for
| an employe contribution of per cent
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