THE PRINCIPLES AND PRACTICES OF PROFIT SHARING ILLUSTRATED FROM THE PROFIT SHARING PLANS OF THE EASTMAN KODAK COMPANY, THE PROCTER AND GAMBLECOMPANY, SEARS, ROEBUCK AND COMPANY

231 Pages·012.102 MB·English

by  WOOD, RICHARD HARVEY

TEE FRHI0XFIE3 AHD IRACTIOBS OP PROFIT SHARING
XU.OSTRATKD FROM THE PROFIT SHARING PLANS
OF
the Basmm sodas company
THE PROCTER AHD GAMBLE COMPANY
SEARS* ROEBUCK AHD COMPANY
A DISSERTATION
PRESENTED TO THE
FACULTY OF PRINCETON UNIVERSITY
XH CANDIDACY FOR THE DEGREE
OF DOCTOR OF PHILOSOPHY
e
BY
RICHARD HARVEY WOOD
PRINCETON
194B
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looomsadeA V tfe* aatHurtaani of Baoaomloa and Social Snatl tattoo*
tav Acoaptane*
l^«3b6r0 1943
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'FEB PHIHCIFEES AHD PRACTICES OF PROFIT SHARXHO
m m TRATED FROM THE PROFIT 3HARXBC PIAN0
OF
THE g&STRAS KODAK COHPAHY
TBS PROCTER AHD OAHBIE COHPAHf
SEARS, ROEBUCK AHD COMPANY
ABSTRACT
BY
RICHARD HARVEY WOOD
rn^u&u'Oji
1942
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The 8*4ea» pappose of this thesis is to assess
public policy cm profit Ssrtngt Profit sharing has fallen
bras the position of high osteon it formerly held* Profit
shaving nay* however* servo a useful purpose in certain
situations* with these considerations in mind* the records
of throe of this country* a oldest and most "successful*
profit shying plans are eseeained*
9oo questions are raised and examined in the intro*
dueileo* First* Is profit sharing possible in our eoonanyf
.second* even if possible* is profit sharing advisable?
Although the sharing of profits without ooeksensurate
lcsa*sha?img would be impossible under conditions of pure
competition* it is clear that wo are here dealing with quasi*
monopolistic enterprises* These three firms* therefore*
haws been able to share profits with their eo&loyees* and
there seems to be little question that they have* in fact*
been doing so*
The increases in wages and corporation taxes during
the past decade have tended to underpin© the cempaniee*
qttasi*©o»op©Aietie earning power* So one of them* however*
has as yet suffered such a decline in earnings as to threaten*
eerlously* Its ability to keep Its plan In operation*
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m m tfeer the sharing off profits is advisable depends
ss t M objectives of th» plan and os the degree is which ttsy
• M •ItiteMi m i Objectives aay generally ba elaiNd under
fits teediapt
aealtfl altminu This objective ruao into two major obstacles:
first* t m dlsllbi of many workers (and especially their unions)
for * paternal! on* j and, second, tbs question as to whether
tbs corporation*® altruism is "pur**# !•*«» whether tbs
workers got that they deserve under any given profit Sharing
plan# Saab of tbs thras oonaams examined nor places a
grant deal boss emphasis on tbs "good business* than on tbs
•ltruiatle approach to its plan*
S* Distribution ef tbo fruits of J^ustrg »csPS
NwaHttta* (!-•- »o»> •cw»lXir>. XAtolists h»v* hop«J ttwft
profit Shoring would load to suoh a redistribution of wealth
aim income as would ultimately and tbs oonfilet between labor
and Capital* although sobs of the older workers have* under
each of these three plans* become “capitalists, wages ©till
remain the ©Bin source of incase for the great majority of
the employees*
3* saaoge&se in the BlKldity of sis©© it is
claimed that the leads and lags in prices greatly aggravate
tbs effects of booms and depressions* t?ould profit sharing
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w m » useful purpoa# if it mode wages mere fltsible?
Or# on tbe contrary# should wages be kept steady While the
prise* of tbs othejp factors of production are brought under
e a i M f the effeet of these three plans l« probably to In*
crease the flexibility of wages above# but not below# tbs
•going rate**
4. PrOTlalow of 3«eurtfcr for tt» «orkar«. C M
basis needs of the ves^sni are quite steady# while profits
aye characteristically unsteady, Ttspwrnfemg profit fihariee
la a poor means of providing for the security of tbs worker#
especially if the eesnemy is viewed as a whole* The social
security Act has greatly improved the position of the em~
pleyees of these# as of other# concerns in this respect,
S» agjagj^-ea JjtJBWLJagfidiener.. ofthe UbmJfma**
Tim “general loyalty* of at least scow of the workers may be
increased if they feel# for any reason# that the plan benefits
them* The traditional idea that a * sharing* of profits dll
cause the workers to worfc more efficiently may be valid in
a few oases# but is hardly applicable to modem largs-eeale
1 ndustry# The principal objective occasion to the so three
plans appears to be to decrease labor turnover} and# although
the results cannot be accurately measured# it. secsas probable
that till© objective M s been# at least in part# attained. It
is felt that# on balance# tin© use of a profit sharing plan
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to attain this objective la sound* it Is suggested* however*
that corporations would generally do sell to seek eat and re*
wove the aoro fundamental causes of excessive l&her turnover
aaoag their oqdo^MS tafaa attwnpting to reward length of
service by profit sharing*
the thesis gives a do tailed analysis of the features
and resent development of tbs specific plans used as iHua*
tratlons of profit sharing* and relates these features and
this development to the general principles posited in tbs
Introductory chapter*
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t&srn of o o s m m
p»ee
CHAPTER x
U mW' WP aa 'Pi "Op Rs V* r^ jP^ fv
CHAPTER II
Otttfttandtug Charaoteristioa of the Three Plana..,. 88
(A) The Background* Purposes....«.«*=,••,•,» 38
(B) Eligibility ana Mev^iipj Employee
DlPOtitSo,*M***.»M««0«iM.*M.».M 88
:c) Conpany Contributions..•...**••...•.•*•• 58
ml The Profit Sharing F u n d s * . . . . 4*
Es) Payaenta to Sasgpieyeeat Vithdraoelft ..... 44
CHAPTER III
0eogeay Profits*..»*..#*.»*•**..*«»»•»*...*»»«..*• SI
ji) The £&*tae& Kodak Company »«*•#•«.«**•** Si
(B) The Procter and Oasrible Cwnpeny #**♦****• 57
(Cl Sears# Roetmefc «ua& Cogmany **♦•**♦*•»«*. 61
(D> Cooperative Summary end ConeluBiona* • * * * 85
(li Zheeeeelhg Socialisation of Industry 67
(2) Th® tabor cost Ratio ***•.,»....*.• 71
CPAPTER IV
Psyssnts Stede Ohder t&o Plans »•*•••••».«•«•*«•*«• 75
(A) y M > Kodak QesopSQjr #*«***.,* ..... 74
Wage Mvidand Payassnta $****•**»»** 74
x&uuiduai Results ».*#**9«»*».*«.* 30
Effects of Taxes *.,*«*»*»*•».«*•«. 88
(B) The Procter and Gtmbl© Company *.**.**«. 35
Profit-Sharing Dividends ..«*«»#.*» 84
i&i Other FaOtOra **••*#******«*.#•****. 3a
l3) Individual Results *....*•.«*».,«** 90
(4) Effects of Taxes •••.••.*.*•••««••* 95
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TABI*B OF CGQTEHTS
(CGHT*D)
Pago
CHAPTER IV
(C) Soars, Roebuckand Company *•••••••••••• 97
(X) Company Contributions••«••••••*•••• 99
(2j OthMP 102
(3) Individual Hosuits*••••••»*••••»*•• 109
(4) Effects of ?axes*«********«***.**** 118
(D) Comparative Suraaary and exclusions • • • « • 117
<1) EconomicEf foots•**#* ••*•••*•••*• •* 119
Distribution of Ownership* ••••«•• 120
Distribution of Income.*..«*.*»*• 128
Rigidity of Wages******.... • *••• 128
Incentive**************•.•o****** 132
CHAPTER V
The Problem of Soeurity*.*♦♦♦*♦.*♦»*»»*.********** 157
(A) Statement of tbs Problem*****.,********* 157
(B) The Problem of Old Age••••••»••**•••••*• 158
(1) The Eastman Kodak Company**•••*•••• 158
Effects of Social Security Act..* 143
{2} The Proctor and Cambio Company * * * * * 160
Effects of social Security Act••• 154
(3) Sears,Roebuck and Company**,******* 156
Effects of Social Security Act*** 160
(G) The Problem of Unemployment••••••*•••*•• 161
(1) Prevention •••**•*•*••*»•*••••*•••• 161
The Eastman Kodak Company******** 162
The Procter and Gamble Company* •• 163
Sears ^Roebuck and Company ««****« « 165
Effects of Social Security Act**• 167
(2) Relief***** ...... 188
(D) Comparative Summary and Conclusions «•*•« 170
C1) "Good Business"« « * ♦ * ♦ * * « 171
(2) Evaluation of Company Benefit Plans 174
The Problem of Old Age*•»•••••••• 174
Inclusiveness*•*•••••«••••»•••» 175
Veataaent of Rights»»«••.»»*»*«• 177
Financial Soundness*.•••••••••• 179
The Problem of Unemployment••••• • 182
(3) Effects of Social Security Act**** * 184
CHAPTER VI
Cone3-.USion X89
Appendix *c«Q2
Selected Bibliography -------- 203
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Preface
This study « u undertaken primarily to accumulate
evidence on vhloh both business And public policy toward
profit charing nay bo based* Especial omphawio has boon
placed on analysing tho operations of tho profit sharing
plans of the Kastman Kodak Company, tho Procter and Gamble
Company and of Soars, Roebuck and Company during tho past
10 or 10 years* Have these throe plans performed a useful
function during this perlodf
Tho attempt has boon made to leaven the "academic*
approach to this problem with observations of the ways tho
plans operate in practice* The author has received invalu-
able aid from the staff of tho Industrial Halations Section
at Princeton university, and especially from Professor J.
Douglas Brown, tho Director of tho Section* Professor Frank
D* Graham has been of especial help in the more theoretical
sections of the study* Professor David A. McCabe has con­
tributed very helpful suggestions* numerous executives of
the Kastman Kodak Company, the Procter and Gamble Company,
and Sears, Roebuck and Company have been very kind in sup­
plying the author with facts, explanations and opinions
which have made this study much more realistic than it
otherwise would O l/GOne
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