Profit sharing refers to various incentive plans introduced by businesses which provide direct or indirect payments to employees, often depending on the company's profitability, employees' regular salaries, and bonuses.[1][2][3] In publicly traded companies, these plans typically amount to allocation of shares to employees.
The profit sharing plans are based on predetermined economic sharing rules that define the split of gains between the company as a principal and the employee as an agent.[4] For example, suppose the profits are , which might be a random variable.[4] Before knowing the profits, the principal and agent might agree on a sharing rule .[4] Here, the agent will receive and the principal will receive the residual gain .[4]
Profit-sharing tends to lead to less conflict and more cooperation between labor and their employers.[5][6]
- ^ Monroe, Paul (1896). "Profit Sharing in the United States". American Journal of Sociology. 1 (6): 685–709. doi:10.1086/210565. ISSN 0002-9602. JSTOR 2761478.
- ^ Monroe, Paul (1899). "Profit-Sharing and Cooperation. I". American Journal of Sociology. 4 (5): 593–602. doi:10.1086/210833. ISSN 0002-9602. JSTOR 2761583.
- ^ Monroe, Paul (1899). "Profit-Sharing and Cooperation. II". American Journal of Sociology. 4 (6): 788–806. doi:10.1086/210857. ISSN 0002-9602. JSTOR 2761863.
- ^ a b c d Moffatt, Mike. (2008) About.com Sharing Rule Archived 2016-03-03 at the Wayback Machine Economics Glossary; Terms Beginning with S. Accessed June 19, 2008.
- ^ Dean, Adam (2015). "The Gilded Wage: Profit-Sharing Institutions and the Political Economy of Trade". International Studies Quarterly. 59 (2): 316–329. doi:10.1111/isqu.12200. ISSN 0020-8833.
- ^ Dean, Adam (2016). From Conflict to Coalition. Cambridge University Press. ISBN 978-1-107-16880-0.