Evening star., 1946-03-09
Profit-Shoring Idea
Growing in Industry
Writer Reviews Varying Success
of Plans in the Past
By Thomas X. Ford

Dp HOmdS n. FOfd
Interest in various methods of sharing
profits with employees tends to grow
in periods of good business and bad
industrial relations. This happened
during and after World War I and in
the recovery years of the 1930s At
the present time the House of Repre-
sentatives has before it resolution by
Representative Clare Boothe Luce, Re-
publican, Connecticut, to investigate
proflt-sharing and see if the Govern
ment should encourage it through tax
abatements or by other means.
Employer interest in profit-sharing
springs from a desire to give workers
at once greater portion of the income
from production and greater stake in
the success of the enterprise. Organ
lied labor, while naturally anxious to
have a larger share of the profits, has
generally looked askance at profit
sharing as device to hold down basic
wage rates.
The United Automobile Workers de-
mand upon General Motors for use of
the corporations ability to pay" as the
measure of an increase in the wage rates
OF its employees is certainly a demand
Tor share in proflts-past and prospec-
tive. But it does not call for profit
sharing as that term has been UNDER
stood in the past. The UAW has argued,
with some apparent support in state
ments by the President, that the profits
of an industry can and should be taken
into account in the adjustment of wage
rates. General Motors has maintained
that profits have no relationship to
wages" but the President said Decem-
Der 20, that ability to pay is always one
of the facts relevant to the issue of an
increase in wages"
Definition Of Term.
Narrowly defined, profit sharing is
IAN agreement freely entered into by
which the employees receive share,
fixed in advance, of the profits" In
this sense, the share of profits allotted
to employees must vary in direct ratio to
the amount of profit earned. A very
broad Interpretation holds that any
distribution of funds which would other
wise go to stockholders, including even a
straight wage increase, constitutes
proft-Sharing.
The surge of interest in proft-sharing
during and after World War I was3
shortlived. None of the several surveys
conducted between 1925 and 1885 re-
ported more than a couple of hundred
proft-sharing plans in actual operation.
However, Senate committee which in
vestigated profit-sharing in 1889 is
sued an enthusiastic report praising it
as a method of preserving industrial
peace. Senator Vandenberg, Republic
an, of Michigan said sharing the profits
was essential to the ultimate main
tenance of the capitanstic system"
Not Always Lasting.
While profit-sharing plans have In
many instances succeeded very well and
lasted over long periods of years, the
larger number of plans established In
the past have been discontinued for
one reason or another. No general rules
appear to explain these successes and
failures, but experience indicates that
profit-sharing is most likely to be aban-
doned in periods when there are no
profits to share
Among the long established plans
some of the best known are those
OF Sears, Roebuck & Co., the Gan
nett newspapers and the Eastman
Kodak Co. The first. in operation
since 1915. is one in which the en-
ployes contribute out of wages and
the company out of profits to pension
system. The Gannett papers make an
nual cash distributions equal to Is
per cent of profits, and the Eastman
company measures its profit payments
to employees in proportion to the divi-
dend payments to stockholders.
While the bonuses of such war pro-
ducers as the Jack & Heintz Co. and
the production bonus agreement signed
between the UAW and the Kaiser
Frazer Corp. have attracted wide at
tention, they are not true proft-sharing
plans. That recently announced by
Eric Johnston, however, is not only
profit-sharing but also a management
sharing plan, designed, according to
Johnston, to bring industrial democ-
racy to America"