Profit Sharing Is an Act of Generosity

Is the company you work for one of the country’s biggest corporations? If so, does profit sharing factor into its mission?

Profit sharing is that fringe benefit on top of the employees’ normal remuneration, arising from business success. It has been an irritant and a source of controversy between management and employees based on this bone of contention: capital needs profit, but labor wants a slice of it. Employees assert that capital and labor are partners and allies, and therefore, whatever the former nets, the latter wants, indeed deserves, a part of.

It is in this light that profit sharing clearly has a moral dimension.  Church teaching maintains that man is entitled to a reasonable share in the fruits of his labor. The Vatican II document Gaudium et Spes (GS, 64ff.), says it is a manifestation of a deep social conscience when the owners of the means of production share with the workingman a part of their business success. Profit sharing therefore is an act of Christian generosity. GS adds:

Many are quite aggressively demanding those benefits of which with vivid awareness they judge themselves to be deprived…Without doing harm to the necessary unity of management, the active sharing of all in the administration and profits of these enterprises is to be promoted. (GS, 9)

Not a New Concept

Profit sharing in business is not a new concept or practice in promoting lasting employee-management relations. Many organizations and corporations have mapped out profit sharing schemes to meet certain objectives.

Reward Management: A Handbook of Remuneration Strategy and Practice by Michael Armstrong and Helen Murlis says profit sharing encourages employees to identify themselves more closely with company by developing a common concern for its progress. The practice also intends to “demonstrate in practical terms the goodwill of the company towards its employees, encourage better cooperation between management and employees, and reward success in businesses where profitability is cyclical,” the handbook says.

Intent is Key

But does the intent behind such profit sharing plans matter? Despite advocating for it, the handbook also suggests that the influence of profit sharing on industrial relations is marginal. Armstrong and Murlis cite a survey conducted by the Glasgow University Centre for Research into Industrial Democracy and Participation concluding that profit sharing has been used by employers as an effort-reward operation and not as an attempt to involve employees more closely in decision making.

“The evidence that profit sharing does increase effort hardly exists at all because the link between effort and reward is so tenuous,” says the survey. “What therefore is the point of having a profit-sharing scheme if it is not used to increase productivity…?”

The Church’s Idea

The Compendium of the Catechism of the Catholic Church has an answer: “Business managers must consider the good of persons and not only the increase of profits, even though profits are necessary to assure investments, the future of the business, employment…” (Compendium, 516).

Companies which register small profits or are in the red are not, however, expected to show their generosity by way of profit sharing. But those organizations who rake in big profits and whose leaders and managers proudly claim to be good Christians ought not to abhor the concept of sharing the benefits of their business success.

Sharing one’s blessings with others flows from the evangelical counsel of neighborly love – it is a Christian imperative. To withhold it when one is able to give, smacks of avarice, which in this case, translates into what we normally call corporate greed.