As to the effect on credit when the published earnings show a decrease in profits it is still difficult to do more than surmise, though if the liabilities of the enterprise are made up more and more each year in a growing percentage of subordinated income-debentures we believe the publication of decreased profits would not operate towards the impairment of its credit, and certainly not until the losses became so extensive as to imperil the solvency of the concern—in which latter case it seems clear to us that little can be justly said in support of the custom of concealment.
Would the plan of letting the employees generally become part owners of the concern place them in a position to give trouble to the management of the enterprise, and would they not soon demand, as stockholders, the right to a voice in the direction of its affairs and in the shaping of its policy? On the contrary, it is urged:
(a) That with the proper and timely guarding of the interests of the original investment through sufficient, clear and undeniable limitations upon the rights and powers carried with the issues of deferred stock, such issues could not be used to the detriment of vested interests, but rather:
(b) That such a pecuniary interest in the enlarged success of the business would act as a guarantee of loyalty to the management and as an incentive to the employees to further the legitimate business of the concern, and:
(c) That the employees with a money investment in the enterprise, if for no higher reason than the instinct of self-preservation, would realize the value and necessity for harmonious and sympathetic co-operation between the capital, brains and energy of the concern.
Would capital be benefited by the operation? We claim without reservation that it would—and for the following reasons:
(a) That the net profits of the business would be largely increased through the reduction of friction; the larger incentive of labor; the increase in the physical capacity of the workers to produce; the saving of useless waste; and through the absence of strikes and lock-outs; as in all of such increase in net profits the capital would be an equal sharer with its employees.
(b) That the true loyalty and support of all employees would greatly strengthen the security of the capital in the business and proportionately add to the real value of the investment.
(c) That where adverse legislation may be easy of accomplishment when it attacks the interests of one man or a small body of men, it would be quite a different matter where the interests of all employees are involved.
(d) That the surplus profits would not be paid out and distributed, but would be held in the business, subordinated to the claims of the original investment, and so very materially adding to the security thereof.