This article represents the salient features of those profit sharing plans considered the most meritorious. These various features have been fitted together to represent a consistent and at the same time workable plan.

We make no attempt to compile a model plan applicable to any and all conditions, but rather to present in concrete form one which will serve as a guide to the business man who may be considering the inauguration of a profit sharing plan in connection with the business.

An Outline of the Profit Sharing Plan

The company adopts this plan of profit sharing with its employees as an amendment to the by-laws, to remain in effect until amended or abandoned as hereinafter provided.

1. After paying to preferred and common stockholders an annual dividend of five per cent (eight per cent; ten per cent; etc.), and making due provision for reserve or sinking funds, the company will divide with its honorary employees (contract employees; share- holding employees) any sum remaining, paying to stockholders in proportion to their dividends and crediting to honorary employees in proportion to their yearly wages.

2. Profits shall be computed semi-annually.

3. The sums credited to honorary employees shall be applied to the purchase of shares of the company’s (common) stock at the market value, as determined by the average price of the last one hundred shares sold.

4. An employee may become an honorary employee, eligible to share in the profits, upon signing a contract with the company agreeing to place all stock earned from profits shared upon deposit with the company during the term of his employment, at the company’s option to purchase when the employee leaves the service of the company.

5. Only employees who have been continuously in the employ of the company 4,500 (3,000) hours at the factory (or one year) may become honorary employees.

6. Honorary employees shall be given a pass book in which are recorded the status of payments on the stock, terms of contract, etc.

7. Profit-sharing premiums shall be calculated upon the basis of annual salaries or wages, not deducting for any sickness, save after two months’ absence. When, however, the amount of stock purchased for an employee from the premiums credited shall equal in value the employee’s yearly salary, the premiums shall cease (or, if continued, be paid henceforth in cash). After an employee shall have been a shareholder for five years he may subscribe for an additional amount of stock, equaling twenty-five per cent of his annual salary, and after he shall have been a shareholder for ten years he may sub- scribe for another amount of twenty-five per cent.

8. Employees for whom stock is being purchased may contribute to the purchase fund amounts to be credited in their pass books, and to draw interest at four per cent until the share upon which payment is applied shall have been paid for, at which time dividends shall be paid to honorary employee stockholders on equal terms with other stockholders.

9. The contract of honorary employee shall specify that they waive as stockholders any presumed right to examine the books of the company.

10. Honorary employees, however, may nominate a director or representative of their own selection, who shall be bound in every respect by the votes of the board of directors.

11. The company may cancel the contract with an honorary employee at any time by repaying to him amounts paid on shares of stock, and paying the market value of the stock held by him. If the employee is wasteful or inefficient, the company may elect to rest the decision as to cancellation of contract with a committee of the honorary employees.

12. Employees may make application for withdrawal from the profit-sharing plan, but if during a semi-annual period, they shall draw no profit for any portion of that period. Employees may withdraw at any time by giving notice in writing and will receive money or stock due them, on surrendering their pass books. If they with- draw before two years’ participation, they shall have refunded to them only, the amounts paid by them in cash, as contributions to the purchase of stock. Profit sharing is intended only for permanent employees.

13. Upon an honorary employee’s leaving the company, the company may elect to let the employee continue to draw dividends as a pension fund, and to allow the employee to hold the contract to sell his stock subject to fulfillment at any time he goes into the employment of a competitor or into work for which he draws over one-half his former salary.

14. When a woman honorary employee marries she is entitled to draw in full the value of her stock and accumulated premiums to date. When an honorary employee dies his legal representative is entitled to draw in full the value of this stock and the accumulated premiums to date.

15. The profit-sharing plan may be amended or discontinued by the directors, but the vote shall not become effective until after the date for the declaration of the premium next following.

The Division of Profits

The proposed equal division of profits after five per cent, or six or eight or ten per cent, of the profits are paid to preferred stockholders, means only that the percentage is the same.

If the wages of the honorary employees should exceed in amount the sum paid in dividends to shareholders, the workers would draw more of the profit-sharing dividend.

One Objection to Profit-Sharing Plans

The chief bugbear of stock-sharing plans is the problem of possible ownership of stock by men who acquired it while with the company, but who have left and who are no longer in a position to be influenced to the company’s advantage. Obviously no company wants to face the possibility of having its entire industrial issue held by men no longer employed with it.

The best plans have provided that stock ownership by workers shall affect only those actually at work, and that when they leave the company they must sell their stock.

Several companies make the men sign a contract to resell to the company, and to bind it they actually pay as much as three-quarters of the value.

The idea of letting men see the books, also, is objectionable to most managers, and this is avoided by several companies.

If workmen stockholders may select a director, and it seems entirely safe and desirable to let them do so, they may feel assured that the plan is sincere and honest, even if they don’t see the books.

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