Profiteering

The sponsors and guardians of profit-sharing as a system similarly rule out of their field such systems as that adopted in the remuneration of share fishermen or as the French metclyage system (q.v.). These are methods of dividing, not the profits, but the gross proceeds of an undertaking.

Far more elusive is the distinction between profit-sharing and co-partnership, the essence of which is the issue on favourable terms of share capital to employees; indeed, it is hardly possible to make any clear-cut differentiation, the more so as the terms are constantly used as synonymous.

Early Examples.

The earliest known example of profit sharing in any country seems to be a scheme introduced by the French National Fire Insurance company in 182o, the year of the company's foundation. The British Union Fire Insurance company followed in 1838, and the General Insurance company in 185o. These three schemes are still in active operation. One of the best known of all profit-sharing schemes is that of the Paris house decorator, Leclaire, which was introduced in 1842 and is still in operation. It was at first confined to the nucleus (noyau) of permanent employees belonging to the firm's Mutual Provident and Benefit society; but in 1870 it was extended to all employees.

Some other French schemes are hardly less famous. Godin, of Guise, introduced profit-sharing in 1876; in 188o the business was turned into a joint stock company, and became something in the nature of a co-operative society with domiciles, in a model village. for some classes of workers. The Bon Marche have a scheme dat ing from 188o, under which the whole of the shares In the com pany are to-day in the hands of actual or former employees. It will be evident that the historical origins of profit-sharing are mainly to be found in France.

Great Britain.

The success of profit-sharing in France at tracted much attention in Great Britain, particularly among the "Christian Socialists" (F. D. Maurice, Tom Hughes, Charles Kingsley, Vansittart Neale and others). From about 185o on wards this group had exercised a very strong influence upon the nascent co-operative movement; hence profit-sharing was at this time widely adopted by co-operative societies, and the subject was constantly discussed at the annual co-operative congresses. At the present time (with one important exception : the workers' co-operative productive societies organised from the point of view not of the consumer but of the producer) profit-sharing is little practised in the co-operative movement.

Outside the co-operative movement the first important scheme in England was that of Henry Briggs, Ltd., a firm of coal owners

in Yorkshire, which was introduced in 1865, and was at first very successful but later failed.

A scheme introduced by Messrs. Hazell, Watson and Viney, Ltd., in 1886 was discontinued in its original form in 1895 ; but a sup plementary scheme, introduced in 1890, is still in force, and is of especial interest as the earliest instance in Great Britain of the co partnership type of scheme enabling employees to share in profits by the purchase of shares on specially favourable terms.

In 1889 a scheme of profit-sharing was introduced by the South Metropolitan Gas company, providing for the payment of a cash bonus varying inversely with the price of gas. As the dividends payable to the shareholders under the company's acts also varied inversely with the price of gas, the workers' bonus was linked with the shareholders' dividends, and thus with the company's profits. The scheme was revised in 1894, in such a way that only half of the bonus was thenceforward payable in cash, the other half being invested in the purchase of the com pany's ordinary stock. By successive revisions, strong induce ments were given to the co-partners to leave the withdrawable half of their bonus on deposit, with a view to eventual invest ment ; and from July 1910 onwards it was provided that the withdrawable part of the bonus must be left in the company's hands to accumulate at interest, or invested in the company's stock with the trustees ; or it might be withdrawn by giving a week's notice, but only under special circumstances. This capi talisation of the bonus is a feature upon which the advocates of this type of scheme—following the models specially approved in France—strongly insist. The name of the scheme was changed in 1903 from "profit-sharing" to "co-partnership," as being more descriptive of the nature and purpose of the new relationship that had been established between the company and its employees. In 1920 the scheme became for the first time statutory, under the company's act of that year; and the basis of the scheme was slightly changed. The surplus profits, after the payment of pre scribed basic rates of dividend on the company's stocks, are now divided in the proportion of three-fourths to the consumers (in the form of a reduction in the price of gas) and the remaining fourth in equal parts to the ordinary stockholders, by way of increased dividends, and to the employee co-partners, by way of a bonus at a uniform percentage on their salaries and wages. As before, half of the bonus is capitalised, and the other half may only be withdrawn in special circumstances.