Private-Equity Giants Back New Nonprofit Promoting Employee Ownership
A group of large private-equity firms has agreed to get stock into the hands of more employees at companies they own in an effort to address income inequality.
A coalition of more than 60 groups that also includes banks, pension funds and others has signed on to back a new nonprofit aimed at promoting broad-based stock ownership, officials told The Wall Street Journal.
Ownership Works, as the new organization is known, will help companies roll out share-ownership programs for employees from top executives to lower-level workers. It launches Tuesday with a goal of creating at least $20 billion in wealth for low- and middle-income employees over the next decade.
Ownership Works will set standards for designing ownership programs and advocate for more widespread adoption of them, as well as promote financial-literacy training and employee-engagement efforts.
Among the founding partners are 19 private-equity firms, including Apollo Global Management Inc., APO -0.19% Ares Management Corp 0.46%, KKK, 3.39%, KKR & Co., Leonard Green & Partners LP, Silver Lake TPG Inc., TPG -1.62% and Warburg Pincus LLC. Those that buy control of companies have pledged to institute employee ownership at a minimum of three portfolio companies by the end of 2023.
Ownership Works determined that joining with private-equity firms, which each own dozens of companies that together can employ hundreds of thousands of workers, was a quick way to make an impact and demonstrate the model to other companies, said Executive Director Anna-Lisa Miller.
“Right now, ownership tends to be concentrated among senior management, and there’s a sense that they are the value creators,” she said. “This is about shifting that mind-set to see employees as true value creators.”
The big Wall Street banks and consulting firms that have signed on will work to introduce the concept to their clients, and large pension funds such as California Public Employees’ Retirement System and Washington State Investment Board will encourage the managers they invest with to consider employee ownership when appropriate.
Ownership Works is founded on the idea that giving stock to lower-level employees, on top of regular benefits and wages, is essential to financially elevating working families, improving racial equity and creating better alignment among workers, management and shareholders.
The wealthiest 10% of Americans held $36 trillion in stocks and mutual funds in 2021, an increase of more than 21 times since 1989, according to Federal Reserve data. That compares with $260 billion and an increase of about 12 times for the bottom 50%.
“What I’m really taken with is the sincerity of the effort to address these problems and to have a dialogue between business and labor,” said Wilma Liebman, former chair of the National Labor Relations Board under President Barack Obama, who will serve on the board of Ownership Works.
Others joining with the organization include United for Respect, which has led worker campaigns against private-equity-backed companies, Omidyar Network and the Ford Foundation.
“We need to design into capitalism policies and structures that generate more shared prosperity,” said Ford Foundation President Darren Walker.
Ownership Works is the brainchild of Pete Stavros, co-head of private equity for the Americas at KKR. The son of a road grader for a construction company who sought but never achieved profit-sharing, Mr. Stavros has devoted much of his career to studying the benefits of shared ownership. He and his wife, Lindsay Stavros, personally donated $10 million of the more than $50 million the organization has raised.
KKR began implementing ownership programs at its industrial companies in 2011. The firm has since rolled out programs at nearly all of the companies in its U.S. private-equity portfolio, including garage-door maker CHI Overhead Doors, specialty-films business Charter Next Generation and 1-800 Contacts Inc., the latter two in partnership with Leonard Green.
Other firms have also made strides. Staffing company Insight Global LLC, owned by Harvest Partners LP, recently expanded the opportunity to become an owner to all 4,600 employees, beginning with a $5,000 grant. Insight’s quit-rate has fallen to 14% from 45% in 2018, a decline the company partly attributes to the program.
Public company Ingersoll-Rand Inc. has seen similar results from its ownership program, through which 16,000 employees have earned over $500 million in stock.
“This strikes at the heart of equity and inclusion,” said John Danhakl, managing partner at Leonard Green. “The movement is going to become irresistible.”
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com. Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. Appeared in the April 6, 2022, print edition as 'Private Equity Backs Worker Ownership.'