Profit sharing, when used as a special term, refers to various incentive plans introduced by businesses that provide direct or indirect payments to employees that depend on company's profitability in addition to employees' regular salary and bonuses. 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. For example, suppose the profits are x, which might be a random variable. Before knowing the profits, the principal and agent might agree on a sharing rule s(x). Here, the agent will receive s(x) and the principal will receive the residual gain x-s(x).
Read more about Profit Sharing: USA, Gainsharing
Famous quotes containing the words profit and/or sharing:
“You taught me language, and my profit on’t
Is, I know how to curse. The red plague rid you
For learning me your language!”
—William Shakespeare (1564–1616)
“So close is the bond between man and woman that you can not raise one without lifting the other. The world can not move ahead without woman’s sharing in the movement, and to help give a right impetus to that movement is woman’s highest privilege.”
—Frances Ellen Watkins Harper (1825–1911)