Is employee ownership the key to building workers' wealth?

🌈 Abstract

The article explores the concept of employee ownership as a way to build wealth for workers, particularly in the context of private equity firms acquiring and restructuring companies. It focuses on the experiences of two companies, Potter Global Technologies and C.H.I. Overhead Doors, where employees were given ownership stakes after the companies were acquired by private equity firm KKR.

🙋 Q&A

[01] Employee Ownership at Potter Global Technologies and C.H.I. Overhead Doors

1. What happened when private equity firm KKR acquired Potter Global Technologies and C.H.I. Overhead Doors?

• At Potter Global Technologies, employees were given an ownership stake in the company after the acquisition by KKR.
• At C.H.I. Overhead Doors, which was also acquired by KKR, the entire workforce was made part-owners of the business, contrary to the workers' fears of steep cutbacks.

2. How did the employee ownership model benefit the workers at C.H.I. Overhead Doors?

• When KKR sold C.H.I. Overhead Doors in 2022 for a ten-fold return, the employees received substantial payouts based on their tenure, with some workers receiving checks in the mid-six figures.
• The windfall allowed the Edwards family, who were previously buried in credit card debt, to pay off their debt, start a college fund for their kids, and donate to their church.

[02] The Rise of Employee Ownership

1. What is the history and current state of employee ownership in the U.S.?

• Employee ownership is not a new concept, with Congress passing laws in the 1970s to encourage the practice, but it has struggled to gain widespread adoption in corporate America.
• Today, fewer than a quarter of private sector employees own a stake in their company, even as wages and wealth for rank-and-file workers have stagnated.

2. What is KKR executive Pete Stavros's perspective on employee ownership?

• Stavros, who grew up in a working-class family, is a strong proponent of employee ownership, believing it can motivate workers to work smarter and harder by giving them a stake in the company.
• Stavros has implemented the employee ownership model at 47 companies under KKR and has founded a nonprofit called Ownership Works to train executives on implementing the model.

3. What are some of the criticisms of Stavros's employee ownership model?

• Some critics view Stavros's efforts as "greenwashing" or "whitewashing," arguing that it is mostly a public relations exercise and does not meaningfully address wealth inequality.
• Stavros acknowledges that top executives still stand to make orders of magnitude more than rank-and-file workers when a company is sold, and that employee ownership alone cannot solve the broader wealth inequality problem.