profit sharing

American politician Albert Gallatin had profit-sharing institutions on his glass works in the 1790s. Another of early pioneers of profit sharing was English politician Theodore Taylor, who is known to have introduced the practice in his woollen mills during the late 1800s.{{Cite news |date=21 October 1952 |title=Obituary - Mr Theodore Taylor, a Pioneer of Profit Sharing |work=The Times}} In the United Kingdom, profit-sharing became prominent in the 1860s.{{Cite journal |last=Church |first=R. A. |date=1971 |title=Profit-Sharing and Labour Relations in England in the Nineteenth Century |url=https://www.cambridge.org/core/journals/international-review-of-social-history/article/profitsharing-and-labour-relations-in-england-in-the-nineteenth-century/FB43D6E430C55200D027F9BCCB37B5CD |journal=International Review of Social History |language=en |volume=16 |issue=1 |pages=2–16 |doi=10.1017/S0020859000003989 |issn=1469-512X}}{{Cite journal |last=Perks |first=Robert B. |date=1982 |title=Real Profit-Sharing: William Thomson & Sons of Huddersfield, 1886–1925 |url=https://www.tandfonline.com/doi/full/10.1080/00076798200000025 |journal=Business History |language=en |volume=24 |issue=2 |pages=156–174 |doi=10.1080/00076798200000025 |issn=0007-6791}} In 1889, economist Nicholas Paine Gilman documented 135 cases of profit-sharing in the United States and Europe.{{Cite book |last=Gilman |first=Nicholas Paine |url=https://books.google.com/books/about/Profit_Sharing_Between_Employer_and_Empl.html?id=C1xHAAAAYAAJ&redir_esc=y |title=Profit Sharing Between Employer and Employee: A Study in the Evolution of the Wages System |date=1889 |publisher=Houghton, Mifflin and Company |language=en}}

Economists debated profit-sharing in major economic journals in the 1880s.{{Cite journal |last=Giddings |first=Franklin H. |date=1887 |title=The Theory of Profit-Sharing |url=https://www.jstor.org/stable/1882764 |journal=The Quarterly Journal of Economics |volume=1 |issue=3 |pages=367–376 |doi=10.2307/1882764 |jstor=1882764 |issn=0033-5533}}{{Cite journal |last=Aldrich |first=Richard |date=1887 |title=Some Objections to Profit-Sharing |url=https://www.jstor.org/stable/1880773 |journal=The Quarterly Journal of Economics |volume=1 |issue=2 |pages=232–242 |doi=10.2307/1880773 |jstor=1880773 |issn=0033-5533}} William Cooper Procter established a profit-sharing plan in Procter & Gamble in 1887.{{britannica|477828|William Cooper Procter}}

Profit-sharing has historically been a prevalent practice in the Hollywood motion picture industry.{{Cite journal |last=Weinstein |first=Mark |date=1998 |title=Profit-Sharing Contracts in Hollywood: Evolution and Analysis |url=https://www.journals.uchicago.edu/doi/10.1086/468014 |journal=The Journal of Legal Studies |language=en |volume=27 |issue=1 |pages=67–112 |doi=10.1086/468014 |issn=0047-2530}} Profit-sharing partnerships are also prevalent in industries such as law, accounting, medicine, investment banking, architecture, advertising, and consulting.{{Cite journal |last1=Levin |first1=Jonathan D. |last2=Tadelis |first2=Steven |date=2005 |title=Profit Sharing and the Role of Professional Partnerships |url=https://doi.org/10.1162/0033553053327506 |journal=The Quarterly Journal of Economics |volume=120 |pages=131–171 |doi=10.1162/0033553053327506}}

The Harvard economist Martin L. Weitzman was a prominent proponent of profit-sharing in the 1980s, influencing governments to incentivize the practice.{{Cite journal |last=Matthews |first=Derek |date=1989 |title=The British Experience of Profit-Sharing |url=https://www.jstor.org/stable/2597095 |journal=The Economic History Review |volume=42 |issue=4 |pages=439–464 |doi=10.2307/2597095 |jstor=2597095 |issn=0013-0117}} Weitzman argued that profit-sharing could be a way to reduce unemployment without increasing inflation. Economists have debated the effects of profit-sharing on different outcomes.{{Cite journal |last1=Cahuc |first1=Pierre |last2=Dormont |first2=Brigitte |date=1997 |title=Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data |url=https://www.sciencedirect.com/science/article/pii/S0927537197000080 |journal=Labour Economics |volume=4 |issue=3 |pages=293–319 |doi=10.1016/S0927-5371(97)00008-0 |issn=0927-5371}}{{Cite journal |last1=BLANCHFLOWER |first1=DAVID G. |last2=OSWALD |first2=ANDREW J. |date=1987 |title=PROFIT SHARING—CAN IT WORK? |url=http://dx.doi.org/10.1093/oxfordjournals.oep.a041771 |journal=Oxford Economic Papers |volume=39 |issue=1 |pages=1–19 |doi=10.1093/oxfordjournals.oep.a041771 |issn=1464-3812}}{{Cite journal |last=Meade |first=J. E. |date=1972 |title=The Theory of Labour-Managed Firms and of Profit Sharing |url=http://dx.doi.org/10.2307/2229945 |journal=The Economic Journal |volume=82 |issue=325 |pages=402–428 |doi=10.2307/2229945 |jstor=2229945 |issn=0013-0133}}{{Cite journal |last=Kruse |first=Douglas L. |date=1992 |title=Profit Sharing and Productivity: Microeconomic Evidence from the United States |url=http://dx.doi.org/10.2307/2234849 |journal=The Economic Journal |volume=102 |issue=410 |pages=24–36 |doi=10.2307/2234849 |jstor=2234849 |issn=0013-0133}}{{Cite journal |last1=Azfar |first1=Omar |last2=Danninger |first2=Stephan |date=2001 |title=Profit-Sharing, Employment Stability, and Wage Growth |url=http://journals.sagepub.com/doi/10.1177/001979390105400305 |journal=ILR Review |language=en |volume=54 |issue=3 |pages=619–630 |doi=10.1177/001979390105400305 |issn=0019-7939}}{{Cite journal |last1=FitzRoy |first1=Felix R. |last2=Kraft |first2=Kornelius |date=1986 |title=Profitability and Profit-Sharing |url=https://www.jstor.org/stable/2098353 |journal=The Journal of Industrial Economics |volume=35 |issue=2 |pages=113–130 |doi=10.2307/2098353 |jstor=2098353 |issn=0022-1821}}

The share of profits paid to the management or to the board of directors is sometimes called the tantième.{{citation needed|date=December 2018}} This French term is generally applied in describing the business and finance practices of certain European countries, including Germany, France, Belgium, and Sweden. It is usually paid in addition to the manager's (or director's) fixed salary and bonuses (bonuses usually depend on profits as well, and often bonuses and tantieme are treated as the same thing); laws vary from country to country.

In the United States, a profit sharing plan can be set up where all or some of the employee's profit sharing amount can be contributed to a retirement plan. These are often used in conjunction with 401(k) plans.

Gainsharing is a program that returns cost savings to the employees, usually as a lump-sum bonus. It is a productivity measure, as opposed to profit-sharing which is a profitability measure. There are three major types of gainsharing:

• Scanlon plan: This program dates back to the 1930s and relies on committees to create cost-sharing ideas. Designed to lower labor costs without lowering the level of a firm's activity. The incentives are derived as a function of the ratio between labor costs and sales value of production (SVOP).
• Rucker plan: This plan also uses committees, but although the committee structure is simpler the cost-saving calculations are more complex.Rucker, A. W. et al., [https://www.jstor.org/stable/2518769 Re: "Management's Attitude toward Wage Incentive Systems"], ILR Review, Vol. 5, No. 3 (April 1952), pp. 422-425, accessed 29 March 2023 A ratio is calculated that expresses the value of production required for each dollar of total wage bill.
• Improshare: Improshare stands for "Improved productivity through sharing" and is a more recent development. With this plan, a standard is developed that identifies the expected number of hours to produce something, and any savings between this standard and actual production are shared between the company and the workers.{{Citation

| last1 =Gomez-Mejia

| first1 =Luis R.

| last2 =Balkin

| first2 =David B.

| title =Managing Human Resources

| place =Upper Saddle River, New Jersey

| publisher =Pearson Prentice Hall

| year =2007

| edition =Fifth

| isbn =978-0-13-187067-3 }}

• Co-determination
• Employee stock ownership
• Joint venture
• Mutualization
• Retirement plans in the United States
• Social dividend

• Weitzman, Martin L. (1985). "The Simple Macroeconomics of Profit Sharing". The American Economic Review. 75 (5): 937–953. ISSN 0002-8282.
• Weitzman, Martin L. (1985). "Profit Sharing as Macroeconomic Policy". The American Economic Review. 75 (2): 41–45. ISSN 0002-8282.
• Weitzman, Martin L. (1987). "Steady State Unemployment Under Profit Sharing". The Economic Journal. 97 (385): 86–105. doi:10.2307/2233324. ISSN 0013-0133.

{{Reflist}}

• {{wikiquote-inline}}

{{Authority control}}

Category:Employment compensation

Category:Profit