Evening star., 1938-12-04

LABOR QlSllluSlOneQ experience IN
regard to prof1t-sharing plans has been
that they have been used as a device
to avoid the payment of an immediate
decent wage" the G. I. o. leader said,
"and made labor dependent on hap
hazard industrial and financial policies
of management"
That this danger of profit dividends
being substituted for wages is a real
one is evident not only from the record
OF. such mistaken efforts, but also from
the insistence by industry spokesmen
that such plans must not be used for
this purpose If management has any
hopes of their successful operation.
One of the earliest to experiment with
the idea, Proctor g. Gamble Soap Co..
informed the committee through its
president, Richard R. Deupree, that "our
plan is based upon payment of the ruling
wage of the community. The profit
sharing must be plus quality. 1t would
be grave mistake to lower wages below
the community level"
In Operation Since 1887.
With this principle in operation,
Proctor & Gamble has preserved its
prof1t-sharing plan since 1887. For the
last IS years, is was explained by Mr.
Deupree, the plan has been a combina-
ton profit-sharing and stock purchase
scheme by which employees accumulate
an equity in the company during the
first five years of their service and after
that time receive not only dividends on
their stock. but also profit dividends in
proportion to theirs and the company's
earnings.
In explaining the nature of his COM
panys plan, Mr.. Deupree advised the
committee that no rigid fomula could
be prescribed for all companies, a con-
tention which was echoed by all of in
dustry's witnesses and found agreement
in the committee.
A reflection of this fact is found most
convincingly in the results of a recent
survey of profit-sharing plans by the
National Industrial Conference Board
Analyzing so active plans, the board
found that in IA cases deductions for
capital earnings were made before COM
putting the employees share of the profits,
in 19 an initial deduction was made for
dividends, in 8 the profit bonuses were
in direct proportion to the dividends, in
~ payments to employees are apportioned
in accordance with the ratio their earn
ings bear to the total pay roll in 18 the
apportionment is estimated on basis
Of service, earnings and rank, in AZ the
distribution was wholly in cash, etc.
The board found, as has the commit
tee, that the most frequently cited rea-
son for the plans was that they brought
increased efficiency among workers, i'm
proved labor relations and decreased
labor turnover.
Harmonious Relationships.
Without exception the witnesses before
the Senate committee have declared that
the plans have made for harmony in
their relationships with their employees.
More challenging perhaps than the
bare idea of profit sharing has been the
thought that its greater application
could be encouraged by some means of
incentive taxation.
In one way or another, of course much
taxation is incentive-either in encour-
aging that something be done or that 1t
not be done. Such. for instance, was the
principle of the much criticized undis-
tributed profits tax in providing an in
centive for paying out greater dividends.
Another example may be found in
many of the State unemployment COM
pensation laws containing provision
that employers showing stable employ
ment record should be rewarded by
concession in the unemployment COM
pensation tax rate. Although not yet
operative and somewhat clouded by
doubts as to its workability, the District
unemployment compensation law has a
provision-ordinarily referred to as a
merit clause-by which the tax rate on
some employers may be lowered and that
on others raised on the basis of their
labor turnover
Obviously, acceptance of the principle
OF incentive taxation implies departure
from any contention that taxes should
be levied for revenue only and Weakens
correspondingly any opposition to puni-
tive taxation.
Presented by Kodak Official.
This very argument, together with an
explanation Of how operation of a profit
sharing plan may afford indirect tax
relief rather than direct, was presented
to the committee by M B. Folsom, treas
urer of the Eastman Kodak co.
1--WE believe 1t is unsound to impose
or withhold taxes as means to infiu-
ence or direct action Of this type" Mr..
Folsom said. "but that taxes should be
levied for revenue purposes only.
while our wage dividend is not taken
into consideration in fixing wages for
tax purposes it is regarded as income to
the individual and as q deductable ex-
pense of the company. That affords the
company the only normal benefit to
which we believe it is entitled"
Although their disapproval is based on
an Understandable complaint of discrim-
ination against seasonal or otherwise
helpless industries, the opposition of the
National Association of Manufacturers
to incentive taxation drew the fire of
Senator Vandenberg.
I'VE are opposed" the N. A. M. said in
a resolution adopted by its Executive
Committee, Ito the proposal that any
special tax relief be granted to companies
having regularized their employment
all sinA