Most people spend their profits

1. To fuel growth (use money to make more money)

2. For conspicuous consumption (splurge on expensive services/stuff)

3. To pay off debts (bank loans)

4. To make a name for themselves (foundations/trusts/grants)

5. To gain/consolidate/expand/increase influence (donations to political parties)

6. To patronize (artists/craftsmen/scientists/mathematicians)

Where do the profits go? — Xtrix

Profits increase the value of the company.
Yes, it can be used to pay off debts or fuel investments for growth.
But it belongs to the company, which in turn belongs to the owners of the company.

(1) You work at a company and help produce a product — whether a good or a service.
(4) Why should I have no input in deciding where the profits — that I helped generate — are allocated and how they’re distributed?

An employee is not an owner, so should have no input in this. If you are an owner (you own any stock say), then you very much do have input in this, if only to vote for the guy you want making these sorts of decisions for you. The actual decisions are not made by the stockholders any more than laws are made by the average citizen.

The profits of corporations go to the shareholders (who own the company). The profits of private companies go to the owners--good, bad, or indifferent.

Per Agent Smith they go for various purposes.

What people do with their share of the profits depends on how big a share of the profits they get. Pension funds which own a lot of stock get a lot of profits which they distribute to pensioners. Very small stakeholders (like... $20,000 worth of stock total) could supplement whatever other income they have, but not by. lot. Insurance companies, which own a large share of stocks, use the profits they receive to defray payouts and to reinvest. Mutual funds, which own a lot of stocks, pay out benefits and reinvest.

Sometimes there are no profits.

People who get a lot of income from their investments tend to spend it on lavish living expenses. Cars, houses, travel, education, boats, planes, gambling, high quality drugs, expensive home furnishings, expensive clothing, etc. require substantial income.

If people have more money than they know what to do with, they can sock their excess money away in various instruments. They might give some of it away, though a lot of big gift-giving is in the name of a corpse.

The amount of money that the richest 1% (or 1/10th of 1%, or even 1/100th of 1%) have a lot of one which in itself keeps growing --earning profits. Thus, the rich keep getting richer.

Yet this strikes me as an essential stepping stone to changing the anti-democratic, plutocratic way we currently structure our economic system. — Xtrix

The simplest way to change the undemocratic, plutocratic system is to take their property away from them without compensation. (Well, let's say the compensation is that after we strip their assets, we don't shoot them.)

An employee is not an owner, so should have no input in this. If you are an owner (you own any stock say), then you very much do have input in this, if only to vote for the guy you want making these sorts of decisions for you. The actual decisions are not made by the stockholders any more than laws are made by the average citizen. — noAxioms

In the first half of this you use "should" and the next part use "are not". Which are you talking about, the way things are or the way things ought to be?

In the first half of this you use "should" and the next part use "are not". Which are you talking about, the way things are or the way things ought to be? — Isaac

I meant them both the way I said. The 'should' part is a statement of how things ought to be. The latter statement was one about how things (correctly) are.
The statement were about different groups, the former being employees and the latter about stockholders.
Neither statement was one about where the profits actually go, which was a part of the post to which you didn't respond.

I meant them both the way I said. The 'should' part is a statement of how things ought to be. The latter statement was one about how things (correctly) are — noAxioms

I see. I'm struggling to see the moral imperative for a non-owner to have no input deciding where the profits are allocated. Is there some harm you foresee arising from such an input? Or is there some virtue being neglected if a non-owner has an input?

Obviously, profits go into the owners (and shareholders, CEOs) pockets.

In a perfect world (re ), owners are benevolent, and profits are plowed back into the economy and benefit society. And sometimes, they are. Usually however, profits are used to gain more power.

What if we were a species who found working for another individual (or small group) anathema? We just would not do it (I mean right from the get-go, right from the moment our species achieved consciousness). This could either be from the purest form of greed (Perfect Libertarianism) or from the purest form of communalism (Perfect Communism). What kind of society might emerge? Would progress be possible for such a species? Would institutions form?

(Hey, I'm a big lefty. I think the citizens of the US are hopelessly right-wing. US citizens, almost universally, dislike thinking for themselves and are far too trusting of the oligarchs. But, of course, that's a problem for all of humanity, and the US is no better. We have two parties in this country : the far-right R's and the center-right D's. Neither speaks to me. I'd emigrate if it was easy to do - although, I'm not sure where I'd go. If Trump gets back into power, I've taught my children to goose-step and salute and finally turn the old man in as a hopeless lefty to prove their loyalty.)

Obviously, profits go into the owners (and shareholders, CEOs) pockets. — Real Gone Cat

They wouldn't be profits if they did. They remain owned by the company, and said owners only get money in their pockets if they sell their portion of the company. Any money the CEO (and other employees) takes home is part of the cost of running a business, and is not profit.

I'm struggling to see the moral imperative for a non-owner to have no input deciding where the profits are allocated. — Isaac

I suppose that depends on the moral standard under which the company operates, which is often set by the country in which it operates. It would likely destroy the company if the employees were allowed to just run off with any excess cash, but there is in most instances an involuntary tax on the profits which go to social programs which benefit everybody, not just the company, and not just their employees. This tax seems for the most part to serve the moral imperative which you suggest.

I am not an economist, but I suspect the principal use of profits is to create new debt.

No doubt there is research on this sort of thing.

I thought the definition of profit was revenue - cost, when revenue > cost. I didn't realize the definition of profit was what you did with it! My bad!

The CEO is unlike other "employees" in that they are over-compensated for their input. They pocket profit created by the labor of others.

Hey, I'm not against capitalism. But it should be tempered, via regulation if necessary.

But I'm not going to get into a debate with a die-hard laissez-faire capitalist. I'm too busy these days - I only look in on TPF sporadically. The floor is yours, sir.

I thought the definition of profit was revenue - cost, when revenue > cost. — Real Gone Cat

I think that's gross profit. I mean, I worked for a software joint, so almost all the revenue was gross profit since it the cost of manufacturing is negligible. But the cost of R&D, facility overhead, maybe portions of acquisitions, new construction, dividends, etc. come off that. Profit is what's left.

The CEO is unlike other "employees" in that they are over-compensated for their input. They pocket profit created by the labor of others.

One can argue either side of that point, but that's certainly the way it looks from the sweat-shop employee view. Still, the company wants to maximize said profits, and overcompensating a CEO is not going to do that, so there must be a reason they're willing to shell all that out to him.

Hey, I'm not against capitalism. But it should be tempered, via regulation if necessary.

Totally agree. The system as it is now seems to be designed to widen the gap between the haves and have-nots. I've found it to be an interesting exercise to attempt the design of a better way to go about it. 'Taint easy. Ditto with designing a government from scratch.

The floor is yours, sir.

Not my topic.

On the subject of direct payment to owners, the only way I know to do this is via dividends, and despite a direct negative impact to profits, many companies do this.

The money trick!
In my opinion, one of the biggest mistakes our human race ever made.
When enough people with power and influence fully recognise the mistake and want to change things then maybe humans will learn to nurture life and all living things and not something as destructive as the nurture of profit. Can humans create a stable, progressive, fair society? We have not been able to so far, or at least all attempts to do so have failed due to a corrupt few from the inside or due to an outside, already established plutocratic force, controlled by a few.
BUT, the struggle to succeed continues.

A quick reminder that shareholders are not the owners of the corporation.

I for one stand corrected.

An employee is not an owner, so should have no input in this. — noAxioms

They should have input, considering without them there is no company and no profits.

Unless of course we’re in favor of tyranny and slavery. But I’m in favor of democracy — whether in government or in a company.

But it belongs to the company, which in turn belongs to the owners of the company. — noAxioms

Says who?

The simplest way to change the undemocratic, plutocratic system is to take their property away from them without compensation. — Bitter Crank

Why is this simpler than having workers have a few board seats? I think that’s at least less extreme.

What if we were a species who found working for another individual (or small group) anathema? — Real Gone Cat

I think we already are that species— it’s just been beaten out of our heads in many countries.

I’d recommend everyone read about stock buybacks. A huge amount of profits go to these. Between buybacks and dividends, roughly 90% of profits go back to shareholders.

Who owns the shares? No surprise: the top 10%, 1%, 0.1%.

The profits should be distributed better — and that means giving workers a place in decision making. The current system is undemocratic and unjust.

Ideally the profits should go back into the business in R&D and positioning for future growth. That kind of thing declined in the 1980s as corporations came to be seen as objects of raiding as opposed to essential features of communities.

Why is this simpler than having workers have a few board seats? I think that’s at least less extreme. — Xtrix

You can give the workers a few board seats if you want to, I don't care.

The thing is, though, the drive for profit for the few--regardless of consequences--is leading (and has led) to fatal consequences for the many, Making money is the corporate raison d'être. There's no end-point to it.

There's no easy way to convert the system from manufacture for profit to manufacture for need.

There's no easy way to convert the system from manufacture for profit to manufacture for need. — Bitter Crank

Agreed.

The simplest way to change the undemocratic, plutocratic system is to take their property away from them without compensation.
— Bitter Crank

Why is this simpler than having workers have a few board seats? I think that’s at least less extreme. — Xtrix

So this is just a special case of the failure of democracy in general. Ideally, a democratic society would naturally evolve to minimize the plutocratic influence. Instead, what we see everywhere and without exception is the ever-increasing corruption of democratic ideals through the infiltration of plutocratic influences. The gap between the rich and the poor has been steadily increasing as long as it has been measured. So clearly technological knowledge is socially and morally meaningless (or worse, socially and morally damaging). Handing out a few board seats is only going to create a few more martyrs. Or a few new plutocrats.

If we turn to those restrictions that only apply to certain classes of society, we encounter a state of things which is glaringly obvious and has always been recognized. It is to be expected that the neglected classes will grudge the favoured ones their privileges and that they will do everything in their to power to rid themselves of their own surplus of privation. Where this is not possible a lasting measure of discontent will obtain within this culture, and this may lead to dangerous outbreaks. But if a culture has not got beyond the stage in which the satisfaction of one group of its members necessarily involves the suppression of another, perhaps the majority---and this is the case in all modern cultures,---it is intelligible that these suppressed classes should develop an intense hostility to the culture; a culture, whose existence they make possible by their labour, but in whose resources they have too small a share. In such conditions one must not expect to find an internalization of the cultural prohibitions among the suppressed classes; indeed they are not even prepared to acknowledge these prohibitions, intent, as they are, on the destruction of the culture itself and perhaps even of the assumptions on which it rests. These classes are so manifestly hostile to culture that on that account the more latent hostility of the better provided social strata has been overlooked. It need not be said that a culture which leaves unsatisfied and drives to rebelliousness so large a number of its members neither has a prospect of continued existence, nor deserves it.
~Freud, The Future of an Illusion

I suppose some is kept in the bank, some given as dividends to shareholders, and some invested into the stock market.

None of this is really of any use or benefit to anyone except the rich playing their game of buying shares from one another.

Profits are used/abused by varying degrees at different times in s company’s history I would imagine.

It is a little like asking ‘where do your personal earnings go?’. There is no ONE answer to this question. I think the only consistent theme is we, and companies, generally try and meet the minimum means of sustaining ourselves then venture, store, save or invest in future schemes.

I have a feeling there is a punchline to this OP?

‘where do your personal earnings go?’. There is no ONE answer to this question. — I like sushi

That's true. Nevertheless, we have to accept (unconditionally?) that a considerable percentage of our earnings go directly to taxes or other kinds of expenditure.

In a sense money doesn't have a final destination. Money is nomadic and people's banks, wallets etc are money motels :lol:

Edit: Another question. Does the gov own the fiat currency? Gov faces are on it and in USA free masonic symbols. I'd think whose faces and symbols are on money should indicate something about who controls it.

*A fiat money is a type of currency that is declared legal tender by a government but has no intrinsic or fixed value and is not backed by any tangible asset, such as gold or silver.

Fiat currency is debt based pyramid scheme.

I have a feeling there is a punchline to this OP? — I like sushi

It does. I kind of threw it in there without much fanfare, but it's here: https://thephilosophyforum.com/discussion/comment/742619

90% of profits go back to shareholders in the form of dividends and stock buybacks. That's really the answer.

The rest is reinvested in the company through increased wages, new equipment, new research/development, etc. A sorry state of affairs. In the 50s and 60s and most of the 70s, this wasn't the case.

A major change was 1982, when the SEC created rule 10(b)-18, which provides a "safe harbor" for share repurchases -- meaning that it won't be investigated as manipulation. This was overseen by John Shad, himself a product of Wall Street.

(3) Where do the profits go?

In my experience having discussions with workers, this question is rarely asked. So it’s no surprise the following question is asked even less:

(4) Why should I have no input in deciding where the profits — that I helped generate — are allocated and how they’re distributed? — Xtrix

Your near-sighted, biassed and communist (in the bad sense, not in the good sense) way of looking at things is shown very clearly in this post of yours.

You are quite wrong that workers have no say where the pofits go. Or part of the profits.

You are wrong because you clearly haven't followed through your own line of thinking. You stopped at a spot where you shouldn't have stopped, and declared that workers have no say in where the profits (or parts of it) go.

This following explains how workers have a say in it. It is not a straightforward, but a rather convoluted way; but the end result is that workers have very much of a say where part of the profits should go.

Part of the profits go into taxes.

Taxes are dished out to other places but to the owners of the company.

Most political representatives in their candidacy state what they will do with the tax money.

The workers have a way of influencing where the tax money goes by voting for those political candidates to represent them who have the promise to put the taxed profit where the worker wants them to put it.

That's how the worker HAS A SAY ON HOW TO DISTRUBUTE THE PROFIT. Or rather, a part of it.

Only near-sighted, non-thinking people who jump into conclusions to prove their biassed and wrong views can not see this and will deny this when it's presented to them.

Part of the profits go into taxes. — god must be atheist

What Is Profit?

Profit describes the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.

Any profits earned funnel back to business owners, who choose to either pocket the cash, distribute it to shareholders as dividends, or reinvest it back into the business.

Do you get tired of being embarrassingly silly?

Try thinking before you write.

(For others: If it still isn’t clear: we’re talking about net earnings — i.e., what’s left after cost/expenses, including taxes. But even if taxes aren’t included, workers have no say where their taxes go except in the very indirect sense of being able to vote for a congressman. When it comes to net earnings in their company, unless they’re a major shareholder they have even less say than this — which is the point of the thread.)

You probably have to define profits here. Do we mean accounting profits (i.e. recorded costs are less than price) or economic profits (i.e. the firm is making more money doing X than it could doing anything else, that is, including opportunity costs when calculating profits). Economic theory suggest that many firms shouldn't make long term economic profits. Established industries tend to have fairly flat rates of return, which is why everyone chases higher investment yields by pouring into new technology sectors, even if old ones such as agriculture are still money makers. Economic profits accrue to owners, since the opportunity costs of workers aren't included in calculating it. You could include implicit costs for workers, but it gets much more complicated than doing it for firms; firms don't substitute leisure for earnings, which is a big wrinkle.

In general, profits go to:
Investments in capital to grow the business.
Payments on debt service for money borrowed to grow or operate the business (you could include these under costs more generally, but sometimes the debt service is for unrelated operations or even activity in markets the firm has since existed, so it's helpful to break it out)
Retained earnings, basically savings the business can draw down upon instead of relying on credit.
Payments out to owners, either dividends if stock has been issued, or profit sharing for partnerships. With sole proprietors, this just goes to one person.

I think what you are getting might be if profits are paid out to workers? This happens regularly in cooperatives, worker owners firms. Dividends go out to the workers. Or sometimes it is a hybrid where all workers get stock, but there are also public shareholders, so workers just get a share of the dividends based on their pay and/or years of service.

Profits can also be used to pay performance bonuses to workers. This isn't that uncommon in small firms, but in accounting terms we would say these are operational costs, and thus count against profits as costs, even if functionally they works very similarly to paying workers dividends. A benefit of incentive bonuses is that they can be targeted at the people who most contributed to the creation of the profit after a period has passed, where as dividends are based on earlier choices and the amount of stock someone has.

My wife's firm was a three member partnership and they would split profits each year into fourths, after deciding what to keep as retained earnings. The extra portion would go to the non-partner employees, and since there were only a handful, this would still be a meaningful amount. Profit sharing is a good way to get people to stick around until the end of the sharing period, but the problem is that then you can end up with a wave of retirements and resignations after the payout.

In many countries (e.g. Germany), labor representatives are on the corporate board, so there you have union workers getting input into how profits are used.

The logic behind workers not being entitled to profit necessarily is that they might not have a very good idea what the interests of the firm are. Managers are managers for a reason. Not everyone can read a balance sheet or revenue report competently. The other reason is that they have much less risk than the owner(s). If the form closes from misuse of profits, they might lose their job, but they won't be dealing with all the debts for the firm. When there are losses, workers still expect to be paid the same, while an owner will take a hit, this is a trade-off of stability for higher potential earnings that come with more risk. Owners have to always be on the ball too, there is a lot of unpredictability in owning a small firm, and sudden work can come up.

I think I probably generate about 50% more profit at my job than I earn, but I absolutely do not want to have to deal with more work in tending to company affairs. I took a pay cut to work less. I also don't want the risk. I know owners who have plowed a substantial amount of their personal savings into their company and pay themselves pretty poorly in lean times to keep it afloat.

But obviously the rationale for owner control gets less and less compelling as the company gets larger and the owners less involved in operations. At a certain size, labor should have a say in profit use.

The logic behind workers not being entitled to profit necessarily is that they might not have a very good idea what the interests of the firm are. Managers are managers for a reason. Not everyone can read a balance sheet or revenue report competently. — Count Timothy von Icarus

This falsely assumes the interests of the firm are contained in a proper reading of a balance sheet. Firms may have social interests. There's no reason at all why those social interests might not trump the financial ones.

The other reason is that they have much less risk than the owner(s). If the form closes from misuse of profits, they might lose their job, but they won't be dealing with all the debts for the firm. — Count Timothy von Icarus

So would you hold that when, for example, Lehman Brothers went bankrupt in 2008 the major shareholders lost more than the employees or customers, who got away relatively unscathed?