﻿8

I.—SCOPE OP INQUIRY.

his labour. If, however, the company issues shares to its work-
men gratuitously or at a price below their market value, or
otherwise upon specially favourable terms, thus making (to the
extent of these concessions) a gift to those among its employees
to whom these shares are issued, then this is a kind of Profit-
sharing ; for, in a case like this, the dividends received by the
shareholding employees are, in whole or in part, received in
respect of this gift and as a reward of their labour supplemental
to their wages. So, again, if a firm makes special arrangements
by which it receives, by way of loan from its employees, sums
entitled to a rate of interest varying with the profits, this may
also be considered to be a kind of Profit-sharing.

The report of the special Committee referred to above proceeds
as follows: —

“ Having explained what they understand by a 1 share in profits,’ the
Committee direct attention to the requirements contained in the Congress
resolution (i.e., the resolution of the 1889 Congress on Profit-sharing)
that the share shall be ‘ fixed in advance.’ It is not necessary that the
employees shall know all the details of the basis upon which the amount
of their share is fixed; thus an employer may agree to give his employees
one-half of all his profits in excess of a certain ‘ Reserved Limit,’ that
limit being communicated only to an accountant who certifies what is due
to the employees; this would he a case of Profit-sharing. On the other
hand, if the share given to the employees is indeterminate, i.e., if the
employer at the end of the year determines whether he shall give one-
tenth or one-fifth, or some other fraction of his profits, to his employees,
at his absolute discretion and not upon any pre-arranged basis—this is
not Profit-sharing.

“ The next question is, supposing the total amount which an employer
is to give to his employees as a body to be fixed upon a pre-determined basis,
must the share of each individual participant be similarly fixed? Or may the
employer distribute this amount at his unfettered discretion among the dif-
ferent employees, according to his opinion of their merit or otherwise? In
strictness, cases of the latter type might well be held not to fulfil our defini-
tion; but the Committee, on careful consideration, are not prepared to declare
such cases inadmissible as instances of Profit-sharing, provided that in any
event the whole of the employees’ share be distributed among all or some
of the employees, except such as shall have forfeited their share by failure
to comply with precise reasonable conditions of participation, but so that
in.no case shall any part go back to the employer.

“ It is important to inquire how far a distribution of profits must
extend in order to constitute a case of Profit-sharing. If the distribution
be confined to managers, foremen, and leading hands, or to any of such classes
of employees, this, in the opinion of the Committee, is not Profit-sharing.
A profit-sharing distribution may exclude persons who are not adults, or
who have not been in the service of the employers for some reasonable
qualifying period, but must, in order to come within the definition of
Profit-sharing, include in any case a large proportion, which the Com-
mittee consider should not be less than 75 per cent.* of the total number of
the adult employees who have been in the service of the employer for at
least one year.”

For the purposes of the present Report, the term “Profit-
sharing ” has accordingly been used as applying to those cases in
which an employer agrees with his employees that they shall

While the general principle here laid down is accepted, it has not appeared proper to
draw in this Report any such hard and fast line as to the irreducible minimum proportion
of employees who must be participants.