Sharing the Profits

Perhaps the first U.S. businessman to share his company's profits with workers--at his Pennsylvania glass plant in 1797--was Albert Gallatin, the Secretary of the Treasury under Jefferson.

Gallatin really started something. To day more than 50,000 U.S. companies have profit-sharing plans, and profit sharing is one of the fastest-spreading ideas in U.S. labor relations, often embraced by men who find themselves on opposite sides of the bargaining table.

Last week the managers of American Motors transferred $9,200,000 from the company's fiscal 1963 earnings into gifts of stock for the workers and contributions to their welfare fund. At the same time, United Auto Workers President Walter Reuther told an A.F.L.-C.I.O. convention in Manhattan that he will press autodom's reluctant Big Three for a share of earnings when contract talks open next August.

Tax Breaks. More than 5,000 new profit-sharing plans were started in the U.S. in 1962, and 4,100 more have been started in the first nine months of this year. Last year the nation's profit-sharing plans set aside from corporate earnings an estimated $2 billion for 5,500,000 Americans. Some companies pay the workers' chunk of profit in cash, but the majority now invest each employee's share and pay off only when he leaves the company. These deferred payments are taxable as capital income, at a top of 25%--which is the main reason that the number of such plans has jumped from 9,000 in 1955 to more than 38,000 today.

The majority of profit-sharing plans are still in smaller companies and involve mostly white-collar workers. But some big companies pioneered in the field, and others are interested. Procter & Gamble, whose plan was started in 1887 and is now the nation's oldest, invests all its profit-sharing funds in P.&G. stock, last year paid out $17 million. Sears, Roebuck invests from 5% to 10% of profits in its plan, which is now worth $1.7 billion; Sears employees who retired last year drew an average of $64,496 each. Such large firms as Eastman Kodak, the S. C. Johnson Co. (Johnson's Wax), Merrill Lynch and the Bank of America have plans, and this year's converts to profit sharing include Montgomery Ward.

Some Objections. Many union leaders feel that such plans tend to make workers feel like managers and soften labor's punch in collective bargaining (wage hikes and extra benefits, after all, come out of profits). The U.A.W. rank and file was disappointed that last week's American Motors payout was slightly less than last year, and Reuther, in negotiation with the Big Three, may be willing to trade off his profit-sharing demand if he can win shorter hours or higher wages. Some executives begrudge profit sharing to workers who (they think) do less to increase earnings than do managers or machines. Others accept it as a weapon to keep out unions (the majority of companies with profit-sharing plans are not unionized).

But there is widespread agreement that profit sharing usually makes employees more cost-conscious and harder-working. Where there is profit sharing, managers notice workers going around shutting off lights, taking special care of their machines, conserving material that might otherwise be wasted, and sometimes even criticizing the inefficiency of fellow workers. In a profit-sharing company, a frequently heard complaint--not always jokingly--is: "That's going to hurt my profit sharing."

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