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Volume :3 Issue : 9 1977      Add To Cart                                                                    Download

PROFIT-SHARING IN IRAN

Auther : Dr. Ferydoon Firoozi

 
On January 8, 1963, the Cabinet, in the absence of the Parliament which had previously been dissolved, approved a bill for industrial profit-sharing.  This along with five others, namely land reform, sales of stocks in all government-owned factories to finance and reform, formation of a 50,000 strong teacher corps for rural education, nationalization of forests and a new electoral law were put to referendum on January 26, 1963.  As was reported, these programs, dubbed as The Shah’s Six-Point Reforms, received an overwhelming approval.  The reforms were expected to hasten industrial development with its corollary urbanization, raise standards of living, secure a just distribution of income, and expedite the achievement of the Iranian economic and social development.  Politically, they were supposed to broaden the base of His Majesty’s support.
 
Profit-sharing with which we are here concerned, besides the above-mentioned objective, was to achieve better industrial relationship, improve the quality of industrial goods, and encourage capital investment.  Profit-sharing, however, was an after-thought.  Originally His Majesty had envisages the sale of up to 40 percent of the shares of government factories to the workers.  In the mid-1950’s he travelled to Europe and The United States, where he discussed his views with some labor leaders.  He was informed that stock ownership by workers had not been well received, but profit-sharing had successfully been carried out by some firms.
 
Returning to Iran, His Majesty commissioned a study of the issue by the Ministry of Labor and Social Services.  The feasibility study concluded that profit-sharing had a more savory impact on capital investment and productivity than stock ownership of the factories.  His Majesty approved the study and directed that Ministry to implement the plan.
 
One of the prerequisites of any profit-sharing plan, however, was not present at the time, namely collective bargaining agents, which are usually trade unions.  Such organizations, along with other political parties, groups and bodies, had been disbanded in 1953.  Hence they had to be operative again.  The provisions of The Labor Act of 1959 made their functioning possible once more.  Thus the stage was set for the implementation of The Profit-sharing program which was unleashed in August 1962.
 
Profit-sharing Law is composed of nineteen clauses, delineating the responsibilities of government agencies, and employees, as well as settlement of disputes arising from the enforcement of the Law. It provides for the distribution of no more than 20 per cent of the net profit based on the parameters of seniority and wage-scale.  It excludes workers in National Iranian Oil Company, tobacco and railroad industries.  Such workers receive payments of bonuses equal to the highest given to those who are covered by the Law.
 
As was expected, the employers and owners of capital were deeply disturbed about the adverse impact of the Law.  They made some covert and at times overt attempts to block its implementation.  Nevertheless the program was launched and the first profit-sharing contract was signed on May 25, 1963.  Official information indicates that as of January 21, 1968, there were 1,465 establishments with 128,139 workers, or 14.43 per cent of the production workers, as enumerated by the 1966 census were covered.
 
It would be difficult to isolate the impact of the program and assess it in isolation.  After a decade of its implementation, however, some tentative judgment can be made as to its effectiveness neither in the context of the over-all development efforts or by itself.  Of necessity some of the conclusions are subjective.
 
On the positive side, the following results have been achieved.  First the gross national product has increased by 2.1 times between 1963-1971.  During the same period the per capita national income has also increased from $224.96 to $350.34.  Second, the workers have profits ranging from an average of $21.54 in 1963-64 to $95.19 in 1970-71.  Third, capital investment has increased from 15.8 percent of gross national product in 1963-64 to 22.3 per cent in 1970-71.  Fourth, there is a perceptible trend towards increased urbanization.  Urban population in 1966 consisted of 61.8 of the population versus 68.6 per cent in 1956.  It remains for the 1976 Census to confirm the continuation of this trend.  Last, His Majesty’s base of support has been expanded to include industrial workers as well.
 
On the negative side, there are first, deep misgivings on the part of the workers about the sincerity of the employers in computation and sharing of the profit.  The workers feel helpless in the face of employers.  Hence no fine collective bargaining is achieved.  Second, there is little evidence to assess the better quality of the products and decrease in waste.  Last, unintended by the Law, are the emergence of weakness in the economy, chief among them being trained manpower and unavailability of accurate data.
 
 
 
 
 
 
 
 

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