Conspicuous examples of successful profit shar ing in the United States are those of the Proctor & Gamble Co.. of lvorydale, Ohio, and the N. O. Nelson Manufacturing Company, of Saint Louis. Mo. The former company employs largely un skilled wage-earners, who receive comparatively low wages. During the year 1886 the work of the company was interfered with by many strikes. and in the following year profit sharing was in• troduced to establish harmonious relations with the employees. Reasonable salaries were allowed the active members of the firm. interest was al lowed on the capital, and the net profits were divided between the firm and "the employees. in the proportion that the wages paid bore to the whole cost of production.•' Although the profits received by the wage-earners increased their in come considerably. they were indifferent to the success of the enterprise until the company di vided them into four groups based upon their in terest in the work. its excellence, and the preven tion of waste. The best group received twice time regular dividend, the second the regular, the third one-half the regular dividend, while the careless and indifferent received none at all. The whole some influence of this discrimination was at once seen in larger dividends. The stockholders did not profit directly by this scheme, but the better profited at the expense of the poorer workmen. \\ hen the firm became a stock company, in 1890, wage-earners were to receive a dividend of 12 per cent. on wages, which was the same as the profits on common stock. The number of (Inployees re ceiving profits increased from 225 in 1887 to 550 in f899, the latter number being 92 per cent, of the total number of wage-earners. Employees are encouraged to become owners of stock and SO of them own 191 shares. Beginning with 1894, $500 is set. aside semi-annually as a pension fund, of which one-half is contributed by the company and the other half conies Irvin the bonuses of the em ployees. Since the beginning of the experiment no strikes or labor difficulties have arisen. In 1894 the labor cost, including the 12 per cent. bonus to wage-earners. was only 63 per cent. of what it had been in 1386.
The N. 0. Nelson Co., brass manufacturers of Saint Louis, t1 o., began a profit-sharing enterprise in 188'6. The company pays out all sums needed in eases of sickness and as they occur, as a part of the costs of the business. Allowances are made for funeral expenses, and upon the death of an employee his family is supported to the extent of two-thirds of his wages, until it is able to support itself. The crucial test of profit sharing enterprises is given in periods of crises, when extra efforts of wage-earners are not re warded by dividends. It is then that wage-earn ers lose interest in them, and the mortality rate of profit-sharing enterprises is high. For the first ten years, 1887-1897. the dividends to em ployees were large. In two years, 1893 and 1896, there were no dividends for employees. That no labor difficulties arose and that wage-earners did not lose interest in profit sharing, even though wages were reduced one-fourth, was due largely to the wisdom of the company. Salaries and inter est were reduced to the same extent as wages, but the one-fourth thus deducted from these shares was to be paid out of future profits before any bonuses were to be paid. In each instance it
was not long before the company was on a divi dend-paying basis and profit sharing weathered the storm in safety. One other feature of the management of the N. 0. Nelson Company shows how profit sharing may pave the way to indus trial co6peration. In 1806 the company made a proposal to employees in the cabinet-making shop which provided for the gradual purchase and management of the enterprise by the employees. The proposal, at first rejected. with a few changes was soon after aecepted, and at present this de partment is owned and managed exclusively by em ployees.
On January 1, 1903, the States Steel Corporation announced a plan of profit sharing. Only those employees who hold positions of re sponsibility share directly in the profits of the corporation. If the net earnings for the year ex ceed $80,000,000, hut are less than $90,000,000. one per cent. of such earnings is to be distributed among the employees, the share to be determined by the finance committee, so as to permit the fullest recognition of merit. With every $10,000, 000 increase in net earnings, the share to he dis tributed increases by per cent. of such increase of earnings. Employees of lower classes are given favorable opportunities for becoming owners of the corporation stocks. To further encourage the holding of stocks, those who buy such stocks and remain in the service of the eompany are to re ceive at the end of five years a bonus of 5 per cent. annually on the face value of the stock held over and above the regular dividends, and the promise of a. bonus at the end of another five years is given. A large number of the employees have already acquired stock. It is hoped that this plan will insure stability on the part of the mass of the workmen and the maximum of zeal cn the part of the higher employees.
The recent record of profit sharing in the United States has not been such as would give encouragement to its ardent supporters. In 1889 there were thirty-four institutions in the United States, while there were but twenty-three ten years later, and of these twelve have been organ ized since 1899. Aside from these failures several others were attempted and soon after abandoned. A variety of causes contributed to the abandon ment of these institutions during this period. The long period of the financial crisis went hard with all of them, and especially with those which had but recently attempted profit sharing. Clang,es in numagement were responsible for its abandonment in other eases. Impatience of suc cess, and abandonment before a fair trial was given, was the situation in a number of other cases. To lack of seriousness in dealing with the matter and to unwisdom in management may be attributed still other failures.
That profit sharing is a scheme which will settle the great difficulties between labor and cap ital none but its most sanguine advocates would claim. But that it may be used in many enter prises to bring about harmony between the em ployer and the employee, to elevate workmen and to prepare the way for industrial co6peration, has; been proved by experience in institutions which have passed beyond the experimental stage.