1. The enterprise earnings considered here are those whose complete partition comprises at most four portions.
One of these at most four portions is an allocation to the self-financing of the enterprise, including allocations to the mandatory reserves — portion hereinafter denoted A. A second portion is a wage supplement paid as earnings-sharing, through which some or all of the staff share in the enterprise's earnings — portion hereinafter denoted I. A third portion is a profit for the effective remuneration of the placements in capital — portion hereinafter denoted P. A fourth portion is an overpayment returned to customers in proportion to their recorded purchases — portion hereinafter denoted T.
2. The partition doctrine that prevails today is the three-portion doctrine.
One of the three portions is allotted to the enterprise: self-financing A. Another is allotted to some or all wage-earners: earnings-sharing I. The third remunerates placement in capital: profit P.
3. The predetermination of the proportions of the portions is often taken for granted.
To consider that the most consistent with distributive justice128 is that these three portions are equal is to prescribe such a predetermination. Another way of predetermining the partition of net earnings is to set quotas, at least one of which is different from the others, for example 40% for portion A, 30% for portion I, 30% for portion P.
4. Which justice or justness is more appropriate in this matter?
Economic exchanges are commutations of transferable properties. This is why commutative justice129 is intended to govern these exchanges, if not in full, at least in large part. Based on this observation, the partition of enterprise earnings raises fundamental questions. What in this partition is the least arbitrary? Is it to hinder as little as possible the stimulating and regulating functions of profit? Is the importance of these functions, for the economy in general and for the wage-earning workforce in particular, of primary importance over the long term?
5. Discrepancies give us pause.
In the case of a partition into three equal portions, one of which is P (the other two being A and I according to the prevailing doctrine), the rate of profit on capital is one third of the rate of earnings on the same base. For a P of 4% on the operating capital paid to shareholders, 12% of net earnings (3 times more) is then required – and 24% of gross earnings with a tax deduction of half of the net earnings. The prevailing opinion, led by authoritative voices, is to perpetuate both portion I and the subjection of enterprises to a tax on their earnings. Such an opinion is inconsistent when it judges that a double-digit rate of gross earnings on capital is too much in favor of shareholders.
6. Earnings and profits are not mere remainders.
For the purpose of calculating an absolute profit target, a board of directors or a self-employed entrepreneur applies a rate that it deems appropriate to the amount of capital. The objective thus set is not the result of a subtraction. In the forward-looking management of the income statement and balance sheet, profit and earnings are not remainders. The portion of earnings included in a forecast and truly complete cost price prix_de_revient_complet is not a remainder. It is only in general accounting and ex-post management control that earnings or loss, as well as all other margins, are only subtractions. A price theory built on the idea that corporate margins are constantly just leftovers is unrealistic, but no such untruth is enough to disqualify an economic theory academically.
7. Portion I has a significant disadvantage, but it is easy to remedy.
Earnings-sharing I, as a wage supplement, has an effect that is all the more important because it is relatively high: different wages, as received on a month-to-month basis, are no longer exactly comparable. The "thirteenth month" (or more) has the same effect, as well as other bonuses and benefits in kind. Chain adjustments are more approximately and slowly made. But the remedy is obvious. The bases of comparison must be the annual all-inclusive wages, even if it means dividing them by twelve or by an annual number of hours of work so that their orders of magnitude are more significant for everyone.
8. The generalization of portion I will have the effect that portion P will remain one of the allocations of an enterprise's earnings.
By definition, portion I exists only when there are earnings. Its generalization will therefore have the effect that earnings will, most often, remain to be partitioned into at least two portions: portion I and portion P.
9. Portion T, that of the overpayment rebated to customers, is fallacious.
In order for an enterprise to be in a sustainable position to give its customers a portion of its earnings, the provision of this discount must be included in its selling prices. Insofar as this enterprise claims to provide its customers with fair prices through this rebate, it is fallacious because of the provisioning that has just been said. Only an overpayment occasionally returned to customers can be economically true . This point is justified by what is explained further in Chapter 11.