Creating Business Philanthropy

  • Prosperity
  • 1907

During the period when Julius Rosenwald was building Sears, Roebuck into the nation’s biggest retailer, he was also pioneering many novel combinations of business and philanthropy. In 1907, just after selling its first public stock, the firm advanced $90,000 to older employees at Rosenwald’s impetus to help them buy shares so they could participate in the company’s success. At the same time, the company created a savings bank for employees that paid 5 percent interest.

The formal launch of the Sears, Roebuck Employees’ Savings and Profit Sharing Plan occurred in July 1916, and it was immediately the largest such plan in the country for including workers in the prosperity of their company. Participation was voluntary and open to any employee with three or more years seniority; enrollment required a deposit of 5 percent of salary. The company in turn added to the fund 5 percent of its net annual earnings. An employee was fully vested in the plan after ten years of service, at which point he could withdraw the full amount of his contributions plus the company’s. No other offering at the time came close to matching the Sears plan in generosity, which Rosenwald believed spurred both workers’ productivity and their habits of thrift.

Rosenwald also created one of the first corporate foundations in history, the Sears, Roebuck Foundation, and built it to substantial size. But his most unusual and bold philanthropic innovation was his willingness to pledge his own fortune (more than once) to protect Sears employees and even preserve the company during the periodic financial panics that wracked the U.S. in the early decades of the twentieth century. Most dramatically, when the sudden recession after World War I pushed Sears to the brink of bankruptcy, Rosenwald bailed out the firm by pledging $21 million of his personal wealth (the equivalent of $288 million today) in a combination of gifts and loans. This stunned Rosenwald’s fellow business executives, and deeply impressed the country. Business writer C. W. Barron, who later fathered Barron’s magazine, hailed the move as “business philanthropy.”

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