"A Message To The Bosses: Share The Profits!" Robert Reich
Last edited Thu Jul 16, 2020, 12:55 AM - Edit history (2)
- "A Message to the Bosses: Share the Profits!"- It’s impossible to predict what kind of America will emerge from the crises we’re now experiencing, but the 4 -decade trend toward higher profits and lower wages is unsustainable, economically and politically. By Robert Reich, Common Dreams, July 15, 2020. - Excerpts, Edited:
After the bruising crises we’re now going through, it would be wonderful if we could somehow emerge a fairer nation. One possibility is to revive an old idea: sharing the profits. The original idea for businesses to share profits with workers emerged from the tumultuous period when America shifted from farm to factory. In December 1916, the Bureau of Labor Statistics issued a report on profit-sharing, suggesting it as a way to reduce the "frequent and often violent disputes” between employers and workers, thereby “fostering the development of a larger spirit of harmony and cooperation, and resulting, incidentally, in greater efficiency and larger gains." That same year, Sears, Roebuck and Co., one of America’s largest corporations, with 30,000 to 40,000 employees, announced a major experiment in profit-sharing. The company would contribute 5 % of net earnings, without deduction of dividends to shareholders, into a profit-sharing fund. Employees who wished to participate contributed 5 % of their salaries. All would be invested in shares of Sears stock.
The plan’s purpose, according to The NY Times, was to “to engender loyalty and harmony between employer and employee.” In reviewing its first three years, The Times noted that 92 % of Sears’s employees had joined up and that “the participating employee not only found an ever-increasing sum of money to his credit, but eventually discovered he was a shareholder in the corporation, with a steadily growing amount of stock to his name.”
Sears’s plan was admirably egalitarian. Distributions of shares were based on years of service, not rank, and the longest-serving workers received nearly $3 for every dollar they contributed. By the 1950s, Sears workers owned a quarter of the company. By 1968, the typical Sears salesman could retire with a nest egg worth well over $1 million in today’s dollars. Other companies that joined the profit-sharing movement included Procter & Gamble, Pillsbury, Kodak, S.C. Johnson, Hallmark Cards and U.S. Steel — some because it seemed morally right, others because it seemed a means to higher productivity. Profit-sharing did give workers an incentive to be more productive. It also reduced the need for layoffs during recessions, because payroll costs dropped as profits did. But it subjected workers to the risk that when profits were down, their paychecks would shrink. And if a company went bankrupt, they’d lose all their investments in it..The best profit-sharing plans came in the form of cash bonuses that employees could invest however they wished, on top of predictable base wages.
Profit-sharing fit perfectly with the evolution of the American corporation. By the 1950s, most employees of large companies had spent their entire working lives with the company. Companies and their employees were rooted in the same communities. C.E.O.s typically worked their way up, and once at the top rarely earned more than 20 times the average wage of their employees (now they’re often paid more than 300 times more). Over a third of private-sector workers were unionized. In 1958 the United Auto Workers demanded that the nation’s automakers share their profits with their workers. Some remnants of profit-sharing remain today. Both Steelcase Inc. and the Lincoln Electric Company tie major portions of annual wages to profits. Publix Super Markets, which operates in the Southeast, and W.L. Gore, the maker of Gore-Tex, are owned by employee stock ownership plans. America still harbors small worker cooperatives owned and operated by their employees, such as the Cheese Board Collective in my hometown Berkeley, Calif.
- There are many ways to encourage profit-sharing. During this pandemic, for example, Congress should prohibit the Treasury or the Federal Reserve from bailing out any corporation that doesn’t share its profits with its employees. -
Since the 1980s, profit-sharing has almost disappeared from large corporations. That’s largely because of a change in the U.S. corporation that began with a wave of hostile takeovers and corporate restructurings. Raiders targeted companies they thought could deliver higher returns if their costs were cut. Payrolls were the highest cost, so raiders set about firing workers, cutting pay, automating as many jobs as possible, fighting unions, moving jobs to states with lower labor costs and outsourcing jobs abroad. To prevent being taken over, C.E.O.s began doing the same. This marked the end of most profit-sharing with workers. But it was the beginning of profit-sharing with top executives and “talent”- through bonuses, stock and stock options to lure and keep the people they wanted. High-tech companies, movie studios and start-ups of all kinds soon followed and ever-greater wealth continues to concentrate at the very top. Since 2000, the portion of total national income going to U.S. workers has dropped farther than in other rich nations..
Jeff Bezos, who now owns 11.1 % of Amazon’s shares of stock, is worth $165 billion overall. Other top Amazon executives hold hundreds of millions of dollars of shares. But most of Amazon’s employees don’t share in the same bounty. If Amazon’s 840,000 employees owned the same proportion of their employer’s stock as Sears workers did in the 1950s- a quarter of the company- each would now own shares worth an average of about $386,904...
Full article, https://www.commondreams.org/views/2020/07/15/message-bosses-share-profits
https://robertreich.org/
