Description: Making profits available above preset rates of pay. There are basically three types of profit sharing in general operation today. The Current Distribution Plan provides for disbursement of cash or shares on a periodic basis. The amount and frequency of the disbursement depends upon profits. Under the Deferred Payment Plan employees periodically earned shares are invested and held to be distributed at some future date, usually upon retirement or the termination of employment. The Combination Plan has elements of both the Current Distribution Plan and the Deferred Payment Plan. A variety of definitions of eligibility exist from small groups of top executives to all employees.
Context: Profit sharing dates to the late 18th and early 19th centuries. The movement spread from France to the UK, the USA and Canada. During these early days it was seen as idealistic by most business people. By 1910, it was seen as a solution to labour unrest. During World War II it enjoyed rapid growth. While the growth of profit sharing was perhaps greatest in the USA and Canada, most nations of the world have groups advocating its use.
Claim: It is seen as a method of improving labour relations, employee security and productivity.
Counter Claim: Profit-sharing cheats the owners of their rightful returns on investment or forces prices upwards and is thus inflationary.
Type Classification: D: Detailed strategies