When Bosses Shared The Profits

After the bruising crises we’re now going through, it would be wonderful if we could somehow emerge a fairer nation. One possibility is to revive an old idea: sharing the profits.

The original idea for businesses to share profits with workers emerged from the tumultuous period when America shifted from farm to factory. In December 1916, the Bureau of Labor Statistics issued a report on profit-sharing, suggesting it as a way to reduce the “frequent and often violent disputes” between employers and workers, thereby “fostering the development of a larger spirit of harmony and cooperation, and resulting, incidentally, in greater efficiency and larger gains.”

That same year, Sears, Roebuck, and Co., one of America’s largest corporations, with 30,000 to 40,000 employees, announced a major experiment in profit-sharing. The company would contribute 5 percent of net earnings, without deduction of dividends to shareholders, into a profit-sharing fund. (Eventually, the company earmarked 10 percent of pretax earnings for the plan.) Employees who wished to participate would contribute 5 percent of their salaries. All would be invested in shares of Sears stock. The plan’s purpose, according to The New York Times, was to “to engender loyalty and harmony between employer and employee.” In reviewing its first three years, The Times noted that 92 percent of Sears’s employees had joined up and that “the participating employee not only found an ever-increasing sum of money to his credit but eventually discovered he was a shareholder in the corporation, with a steadily growing amount of stock to his name.”

Sears’s plan was admirably egalitarian. Distributions of shares were based on years of service, not rank, and the longest-serving workers received nearly $3 for every dollar they contributed. By the 1950s, Sears workers owned a quarter of the company. By 1968, the typical Sears salesman could retire with a nest egg worth well over $1 million in today’s dollars. Other companies that joined the profit-sharing movement included Procter & Gamble, Pillsbury, Kodak, S.C. Johnson, Hallmark Cards, and U.S. Steel — some because it seemed morally right, others because it seemed a means to higher productivity.

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