The fact of there being so few profit-sharing firms tends to show that profit sharing is not a method which appeals generally to both employer and worker.
The following is a profit-sharing scheme adopted by a large firm of engineers in March, 1916, and therefore embodies the most modern conditions:
"1. Before any profits are divided with the employees, the shareholders shall receive 8 per cent. per annum.
"2. When the above 8 per cent. has been paid to the shareholders in any calendar year, all cash dividends subsequently declared in that year will be divided between the shareholders on the amount of their stock interest and the employees on the amount of the salary or wages received by them during the twelve months ending June 30 of that year, as follows: (A) Employees who have been continuously in the service of the company for at least two years prior to July 1 will receive dividends at the same rate as the shareholders. (B) Employees who have been continuously in the service of the company for more than one year and less than two years prior to July 1 will get three-quarters of that rate. (C) Employees who have served continuously for less than one year will get one-half the rate of the shareholders. (D) Dividends that have accrued will be distributed to employees once a year in December.
"3. No person will be entitled to a share of these dividends unless a bona-fide employee of the company at the time of their distribution, except that employees laid off owing to lack of work or sickness will be entitled to the dividends accruing in any year on the wages earned by them during the twelve months prior to June 30 of that year.
"4. Employees voluntarily leaving the service of the company or dismissed or discharged will forfeit their right to any accrued dividends.
"5. Any employee who may receive a commission from the company or any share in profits other than the profits shared in this plan, except through dividends of stock, if a shareholder, shall thereby be rendered ineligible to receive dividends under this plan.
"6. All employees except those entered in the three preceding sections shall be eligible to share in the profits under this plan.
"7. The above plan for division of profit is absolutely voluntary on the part of the company, and is in no sense a contract. The right is therefore reserved by the directors to make at any time such changes in the plan as they may consider desirable for the best interests of the organisation. The fact that any employee is receiving the dividends in this profit-sharing plan shall not deprive the company of the right at any time to discharge the employee, and thereby terminate his participation under the plan, nor shall any employee acquire any right thereunder to any accounting by the company concerning its business or profits."
(d) Co-partnership.
This is another method of inducing the worker to become more efficient. It is frequently allied to profit sharing.
The firm allows its workers to subscribe for shares, and the workers thereby have a direct interest in the success of the firm. The idea is that the harder they work the more profit there will be, and the more dividend on the shares which they hold.
Of course, no worker, especially if he has a family, can subscribe for shares out of his wages. What usually happens is that the firm sets aside a certain portion of its profit, after paying a dividend on its shares, and allows the worker to share this profit. But he gets no money, the profit being paid in shares. For instance, if a worker's share of the profit at the end of twelve months be £10, he gets £10 worth of shares. Then, when the next dividend is declared, he gets the dividend on his £10 worth of shares. If there is a 5 per cent. dividend, he gets 10s. as his interest for the year or whatever the period of time may be.
He is not allowed to subscribe for shares until he has been with the firm a certain length of time, and, in some cases, if he leaves he loses his shares. If he dies, his widow gets the dividend on the shares until she dies, when the shares go back to the firm.
In other cases the shares bear a fixed rate of interest, say 4 per cent., and also an additional dividend if there is any profit after dividends on other classes of shares reach a certain percentage.