SIX PROFIT SHARING PLANS Reprinted from an Article in "Factory Management and Maintenance", February "Eastman Kodak Company. Any employee who has worked 26 weeks or even 26 days in 26 different weeks during the previous year is eligible to participate, although length of service is important as the wage dividend is apportioned according to each employee's total earnings for the preceding five calendar years. In 1937, 24,087 employees out of 27,052 participated. - and "This typifies the working of the plan: Employee A has earned $2,000 a year for 5 years a total of $10,000. In 1937 the company's dividend on its common stock was $4.50 more than $3.50 below $3.50 no bonus is paid or $8. Employee A got of 1 percent of his 5-year earnings for each dollar of dividend declared over $3.50 or 2 percent $225.... "In addition, provision is made for group life insurance, retirement annuities, benefits for total and permanent disability, all provided through a definite plan underwritten by a responsible life insurance company; payments to employees temporarily incapacitated by illness; a medical service designed to conserve health; personal loans in case of emergency; and vacations with pay.... "The Wooster Brush Company. Every one of the company's employees knows he will receive a share, in proportion to his earnings, of a sum representing 15 percent of the year's net profits after payment of 50 cents a share on common stock. "The company was a pioneer in group life insurance. Since 1919, it has paid all premiums on employee policies. This is supplemented by an employee sick benefit plan, by incentive bonuses for skill and accuracy, and by annual vacations at full pay. "Recently a minimum guaranteed wage plan was instituted to give employees an ever greater sense of security. The minimum wage took the place of a monthly bonus of 10 percent over and above the yearly bonus which had been paid since 1932 in any month in which the company showed a profit.... "Procter & Gamble Company.... Ninety-seven and five-tenths percent of those eligible for participation in the plan shared in P & G's 1938 profits. All hourly employees earning less than $3,000 a year are eligible after 12 months' service. The employees' earnings and length of participation in the plan governed the apportionment as follows: 1 to 2 years, 5 percent; 3 to 4 years, 6 percent; 5 to 6 years, 7 percent; 7 to 9 years, 8 percent; 10 to 12 years, 10 percent; 13 to 15 years, 12 percent; after 15 years, 15 percent. "Basically, the P & G plan combines profit sharing with stock ownership. For the first six years the employee devotes his share to the purchase of stock and his dividends to the purchase of additional stock. After that he collects cash dividends in the proportions stated above. After the 6-year period he may continue to buy stock if he so desires... "General Electric. In 1937, a good year, 64,000 of General Electric's 75,000 employees received $5,800,000 in general profit sharing. This sum, in accordance with the plan authorized by the stockholders, represented 12 percent of net profits after 8 percent had been earned on the book value of the common stock. "The recipients included all employees, except management men receiving extra compensation, who had worked one or more consecutive years for the company. Five-year (and up) employees got full shares; 3 to 5-year employees, two-thirds; 1 to 3-year employees, one-third. "In the period from 1916 through 1937, the company has paid out approximately $100,000,000 as total profit sharing.... "Backing up GE's profit-sharing plans is a well-rounded social security program, which has included contributory pensions since 1912; contributory life insurance, since 1920; savings, since 1922; home ownership, since 1924. And in 1936 a plan was adopted to adjust income of employees to changes in cost of living. The employees were offered a contributory unemployment benefit plan in 1925 which was accepted in 1930, after which time the plan provided aid in case of unemployment until it was superseded in 1936 by the Federal Social Security Act." SIX PROFIT SHARING PLANS (Continued) "The ILG Electric Ventilating Company... There is no fixed basis for alloting the return other than the company's commitment to share the profits when the profits are earned. The Board of Directors annually determines what proportion of the company's earnings shall be shared, and these are paid in proportion to the employees' earnings and service. "Payment is made in certificates of deposit, bearing interest at 5 percent. be cashed 14 months after issuance and, from time to time, applied to the purchase of Ilg common stock. "Last year all 306 Ilg employees participated. Since only those of three years' service are eligible, it may be seen that turnover has ceased to be a problem for the company or a worry to the wage earners. "Westinghouse Electric & Manufacturing Company... When average net income for any three consecutive months is $600,000, salaries are at the community rates for similar type of work in that community. Five days is the basic work week. Since May 1, 1936, employees' incomes have risen and fallen with the company's profits. The average monthly net income for three months is totaled, and from it $600,000 is deducted. Then if profits exceed the $600,000 by a given amount, say $93,000, 1 percent of the average base payroll is added. "A substantial increase in profit is reflected immediately, therefore, in cash in the employee's pay envelope. Conversely, the income of salaried employees receiving more than $125 a month is subject to a 1 percent reduction whenever the company's income falls below the $600,000 average by as much as the governing unit of, let us again say, $93,000. "The successful establishment of a plan so unique is witness to the complete confidence which Westinghouse has won from its employees through years of fair treatment and generous attention to every detail affecting the wage earner's welfare. An example is the relief fund which provides benefits of 26 weeks for the disability of employees with less than 5 years of service. The company's pension, savings, group insurance, and educational programs are among the most advanced in industry." CHAIN STORE LICENSE BILL INTRODUCED INTO KANSAS LEGISLATURE The Kansas Chain Store License Bill, known as House Bill No. 5 and Senate Bill No. 51, has been introduced into the two houses of the Kansas legislature. Following the general plan of the similar act passed in Louisiana, the bill begins with a tax of $10 per store and progresses to $550 per store on operators of 500 or more stores. The total number of stores computed must include those outside the state as well as those in Kansas. MECHANIZATION REDUCES FARM LABOR REQUIREMENTS, WPA STUDY SHOWS A striking example of the compensatory workings of modern technology the di placement of men by machines in one industry and the creation of new employment in another by the production and servicing of the machines is presented by the most recent study of the WPA National Research Project, "Changes in Farm Power and Equipment: Tractors, Trucks and Automobiles," made public recently. - While approximately one billion man-hours of farm labor per year have been dispensed with through the widespread adoption of tractors, trucks and automobiles on farms during the last ten years, something more than a billion man-hours of new labor has been created by the consequent expansion in the automotive, rubber and petroleum industries, the report shows. But while the new employment created is significant in a broad economic sense, the immediate effect of this mechanization is to throw thousands of farm tenants and laborers out of work. The new jobs created, generally, are in cities hundreds of miles away from their homes and call for skills and training which few farm workers possess. The report is published as a booklet of 114 pages and contains numerous illustrations, charts and statistical tables. VOTING RIGHTS OF CAPITAL STOCK AND SHAREHOLDERS From an Article by W.H.S. Stevens, Interstate Commerce Commission, in "The Journal of Business of the University of Chicago", October 1938. "Voting by Proxy and by Mail. The board of directors formulates a policy and sends out a summary to stockholders, together with a proxy authorizing a certain person or persons to attend the annual or other meeting and vote the shareholder's stock. The shockholder is not asked to vote 'yes' or 'no' on the proposition, and his only alternative to filling out the proxy and having his interest voted in the affirmative is not to fill it out. By the latter course he very likely attempts to indicate his disagreement with the proposed measure but he does not do so in a way to affect the final result. In practically all cases the interests backing the plan to be voted on control a sufficient number of shares to furnish a majority of the quorum necessary to transact business and carry through the proposal. In other words, unless a fight among the larger interests develops, so that both groups solicit proxies for and against a measure, the shareholder is really unable to express anything other than an affirmative opinion upon any measure proposed by the existing management of the corporation. Stock Exchange governors, who are reported to be considering the question of the voting rights of shareholders, would do well to consider whether measures should not be adopted to allow shareholders to vote 'yes' or 'no' on a proposition either by proxy or by mail or otherwise. "When the Securities and Exchange Commission took up the matter of proxies early in 1935 the writer endeavored unsuccessfully to convince one of the commissioners of the desirability of incorporating provisions similar to the foregoing in any regulations issued. When the proxy rules finally appeared later in that year, they contained no such requirements. In the early part of 1937, however, in connection with the recapitalization of the International Paper and Power Company, certain members of the commission staff suggested to the company the use of voting proxies for obtaining the approval or disapproval of the plan. In May of that year, therefore, about eleven years after its original proposal by the writer, a proxy in the 'yes' and 'no' form (for and against the proposed recapitalization of this company) made its debut. Finally, in August of this year (1938), as this article was in the process of final revision, the commission issued new proxy regulations which include the following rule: "No solicitation subject to Section 14 (a) of the Act shall be made unless (a) means shall have been provided whereby the person solicited is afforded an opportunity to specify, in a space provided in the form of proxy or otherwise, the action which such person desires to be taken pursuant to the proxy on each matter, or each group of related matters, as a whole, described in the proxy statement as intended to be acted upon, other than the election of directors or other officials, and (b) the authority conferred as to each such matter or group of matters is limited by the specification so made. Nothing in Regulation X-14 shall prevent the solicitation of a proxy conferring discretionary authority with respect to matters as to which the person solicited does not make the specification provided for above, or with respect to matters not known or determined at the time of the solicitation, or with respect to elections of directors or other officials. "At the present time the voting proxy is presumably as far as it is possible to go in decentralizing voting control in this manner. The requirement of actual ballotting by mail would no doubt in many cases require an amendment of the state corporation laws. Even though a corporation might be willing to adopt such an arrangement, there might be legal questions in various states as to the validity of action taken thereunder. Nevertheless, this method is probably superior to the voting proxy. Ifthe Securities and Exchange Commission experiment with the new form of proxy is successful, we may look forward ultimately perhaps to a true stockholder's ballot." THE NEWSPAPER'S RESPONSIBILITY TO THE CONSUMER IN ADVERTISING CENSORSHIP "Responsibility has often been confused with liability. A publisher is not in any way liable for the printing of an advertisement that causes damage, injury, or financial loss to a consumer unless he knowingly does so. When he knowingly publishes an advertisement that is fraudulent, he is not only probably liable to his readers in case of damage but he also may be made accountable to the Post Office Department and the Federal Trade Commission. "The liability definitely belongs to the advertiser, and he should not be allowed to shift the burden of it to the shoulders of the publisher. In spite of a rigid censorship, it is still very difficult for the publisher to find out everything about an advertisement within the short time between receiving the advertisement and publication, and, therefore, he must rely to some degree on the advertiser for the truth or falsity of the statements in his advertisements. "The responsibility of a publisher to the consumer, however, is usually thought of as over and above the law a moral responsibility. To some publishers it has grown to be more than a moral responsibility and has assumed the proportions of a moral obligation. "Why should the publication of advertising in a newspaper be considered to involve a moral obligation? There are several reasons. The public, justifiably or not, has come to believe that the publisher has, or should have, some knowledge of the advertiser whose advertising he publishes. The public has come to believe that an advertisement in his columns is a recommendation for public confidence and patronage. On that basis the reader pays his money and often entrusts to advertisers things more valuable than money. What is the good or necessity of censorship? "The answer is known to the wise and honest advertising man and newspaper executive. They not only obey the letter of the law but go far beyond what the law requires in selecting the advertisements they publish. If it were left in their hands alone, false advertising could be practically eliminated within a short time. "When one considers the limitations under which the Federal Trade Commission and Food and Drug Administration must operate in that they can act only after the crime has been committed, and since history points clearly that the advertiser and advertising man now are unable or unwilling to clean up advertising, it is obvious that the only method which will give the public the protection to which it is entitled is that of prevention. The history of all methods of correction is replete with failure. "Newspapers which have an honest censorship need not fear advertising laws, for in those cases they have anticipated the law and are earnestly protecting the public. They anxiously await the day when the unfair handicap that exists between those who have a rigid censorship and those who do not is wiped out and they can continue business on an equal basis. "How can a publisher protect the reader's confidence, his most valuable asset? "The publisher must first eliminate or refuse to publish advertisements he knows to be false and fraudulent, those obviously and shamelessly false, those that cannot be mistaken by any reasonably intelligent person. Secondly, he should eliminate those in the twilight zone. He must take it upon himself to subject all advertisements to the searching spotlight of truth, with a crusading spirit that has a wholesome, wholehearted intolerance of fraud and crookedness. He must vigorously delve into all angles of the proposition to determine before publishing, the fairness, the reasonableness, the feasibility of the claims, and the possibility of fulfilling the promises made in the advertisement." |