to employees, is a nearer approach to profit sharing, but still the share received is purely a dividend. It may, however, have something the same effect as a profit sharing bonus in inducing greater care and diligence in the working force.

On the other hand, there are cases, such as the Oldham spinning mills in England, the small boot and shoe factories which flourished in Massachusetts in the early '80s and the coöperative cooper shops of Minneapolis, in which workingmen, either from the start or after gradual acquisition, have held all or nearly all the stock of a business. These, however, are usually mere joint stock companies, and should be classed as examples of coöperative production rather than as profit sharing establishments, though the term coöperative is itself more properly restricted to those companies which are democratically managed by the employees themselves, whether in their capacity as shareholders or in their capacity as coöperative workers, on the principle of one man, one vote.

In some instances, however, shares of stock are assigned to employees in lieu of a cash or deferred bonus, and such cases are examples of true profit sharing by means of stock ownership. The participation of the employee, then, consists, not in the dividends earned by the stock, but in the original receipt of the shares. The payment, however, is usually made partly in cash, though often it is provided that no cash bonus shall be paid until stock up to a certain amount has been acquired. Thus the firm of Billon et Isaac of Geneva, Switzerland, manufacturers

of the cases and parts of the mechanism of music boxes, introduced in 1871 a system of profit sharing under which the bonus was paid one-half in cash and the other half in shares of the company.

The Proctor and Gamble Company of Ivorydale, Ohio, now requires that an employee, to receive a profit sharing dividend, shall own common stock of the company to an amount equal in market value to a year's wages or salary. If an employee, however, does not hold this amount of stock, the company offers to buy it for him or for her, requiring a small first payment and annual payments thereafter, 3 per cent. interest being charged on the balance due. Dividends are credited to the employee until the stock purchased in his name has been paid for.

In the experiment of the Messrs. Briggs at the Whitwood Collieries in Yorkshire, if the employee did not take a share in the stock of the company his bonus was only two-thirds of that received by a workman who was also a shareholder.

In 1894 the South Metropolitan Gas Company of London offered to increase its annual bonus 50 per cent. on the condition that one-half of it should be invested in ordinary stock. Within twelve months 85 per cent. of the men had accepted the offer, and after a short time all had entered as participants in this addition. The investments in stock, which amounted to £5,000 in 1894, had risen to £80,000 in 1899, and there was also in the latter year £30,000 on deposit. Fifty-five per cent. of the men who owned stock, owned simply the compulsory amount,

but forty-five per cent. had also made voluntary savings. (d) Amount of Bonus: In determining the amount of the bonus to be distributed, it is customary to deduct from the gross receipts, along with other working expenses, interest on the capital invested, though in some cases the net revenue is distributed between the employees and shareholders without any deduction for interest. Sometimes a fixed minimum amount, called "the reserved limit," is set aside for the payment of interest, depreciation and the salaries of management, and in such cases the employees participate only in profits which exceed this reserved limit. Usually the share of the employees is a specified fraction of the net profits, but "in some instances the employer offers to give up to his employees so much of his surplus profits as shall suffice to pay them a bonus at the same rate per cent. on their wages as the dividend earned by the capital, or a bonus at a fixed rate, uniform from year to year. 991 The Proctor and Gamble Company, for instance, pays its profit sharing dividend at the same time as its dividend on common stock, and any employee who receives wages of $500 a year is entitled to a dividend equal in amount to that which he would receive if he were the owner of $500 worth, par value, of the stock of the company.

In a few cases the interest on capital, the wages and the salaries of management are counted as expenses of operation, and profits are distributed in an equal percentage to the three factors, capital, skill and labor. The first

1 Schloss, Methods of Industrial Remuneration, p. 268.

reward of each is determined by the current rates of interest, salaries and wages; and the second and variable reward is to be divided in the same proportions as the first fixed reward. This is the method originally followed by the N. O. Nelson Company of St. Louis.

The plan of the South Metropolitan Gas Company of London is quite different. For every penny gained in the reduction of the price of gas below 2s. 8d. per thousand feet, a bonus of one per cent. and, in case one-half the amount is invested in stock, one and one-half per cent., on wages and salaries is paid.

(e) Distribution of the Bonus: The distribution of the bonus is effected by a considerable variety of methods. In a large number of cases, however, the amount of wages earned during the year is taken as the basis of division, each employee receiving the same proportion of the dis tributable sum that his wages bear to the total amount paid in wages. Sometimes the employees are divided into classes, based on positions held, on different degrees of appreciation of the benefits of profit sharing, on the amount of wages received, or on length of service, and each class shares at a different rate or in a different fund. The Paris and Orleans Railway Company, for instance, originally divided its employees into three classes according to rank, the two higher classes receiving definite proportions of the distributable amount according to salaries, and the third class receiving the remainder. Under the original plan of the Proctor and Gamble Company the employees were divided into four classes, based on the

interest shown in the work, but when the desired result was accomplished this plan was abandoned.

(f) Qualifications for Participation: Participation in profits is sometimes limited to a certain class. In the Coöperative Paper Works at Angoulême, France, for instance, profit sharing began with the overseers and was gradually extended, first to the older workmen, and later to the entire body of employees. The South Metropolitan Gas Company of London, also, introduced profit sharing among its officers and foremen in 1886, but in 1889 extended the system to the workmen.

Between 1882 and 1890 there were five years in which the Pillsbury Flour Mills of Minneapolis, Minnesota, divided considerable sums among those employees who had been in the service of the company for five years, or who occupied positions of special importance, but the proportion of profits to be distributed was never specified beforehand, and "for the last few years the profits of the milling business have not been such as to warrant any division."

Salaried employees may or may not share in the profits. Sometimes only those employees who signify an express desire to be included are made participants. In the Ara Cushman Company of Auburn, Maine, for instance, the bonus was paid only to those who entered into the profit sharing plan by application. The printing, publishing and bookselling house of M. Chaix of Paris, which employs some twelve hundred persons, provides that application must be made to the head of the house and that