From Overworked Employee to Employee Owner

Insights into KKR's employee ownership model

Photo by John Paulsen on Unsplash

Background: This Sunday, 60 Minutes on CBS interviewed Pete Stavros on the topic of employee ownership, and the benefits it has brought both to KKR, a billion-dollar private equity firm, and the everyday workers at Potter Global Technologies and C.H.I Overhead Doors, two KKR portfolio companies. Today, I want to share my insights on KKR’s model of employee ownership.  

Pete Stavros is a partner and is Co-head of Global Private Equity at KKR, a private equity firm. In addition, he is the founder of a nonprofit called Ownership Works, which advocates and trains executives to implement one model of employee ownership into their own businesses.  

Why it matters:  Employee ownership promises to to close the wealth gap faced by millions of Americans in the United States.  

Pete Stavros advocates for private equity investors to embrace employee ownership instead of traditional PE methods, such as: 

• Cutting costs of production by automating jobs 

• Mass employee layoffs 

While the main goal of KKR is to sell the company after restructuring the company in 5-7 years, there is still a maintained agreement upon top business management for employees to transfer their shares to the new business. But… how much protection and autonomy do employees in the long run? (more on this later) 

Employee Ownership in Pete Stavros's Words  

“Ownership is really an ethos, it’s a mindset.”  

Stavros goes on to say it is crucial for employers to feel a sense of ownership over the products or services they are manufacturing for customers. If employees consciously know that they are an important part of the company, they will personally invest in maintaining the products to the highest quality.  

Is the Proof in the Pudding?  

Personal stories encapsulate the effects of employee ownership on employees and the business management opportunities they could have never imagined before:  

• Gina Grant, a factory employee at Potter Global Technologies, explains how much of an impact having part ownership of PCT has been for her. Grant says, “to know the payouts and what it can potentially bring in my future … is actually somethin’ I have prayed for. It’s personal to me.”  

• C.H.I Overhead Doors employees Crystal and Brad Edwards explain to CBS News how life changing the payouts of C.H.I Overhead Doors has been to their family – from paying off all credit card debts to having college funds for their three children.  

• Doors have opened for international expansion of businesses of Simon & Schuster through the acquisition of Veen Bosch & Keuning, which owns the largest publishing firm in Dutch. The acquisition follows the same guidelines of providing employee ownership as the acquisition of S&S by KKR in 2023.  

Criticisms & Future Advancements

The skeptic might point out that only the positive sides of KKR's employee ownership model were shown in the segment. But as one impact investor asked us,  

“This segment talked about how the workers got a decent payout from KKR buying and exiting company. And I’m just like, well what did the LPs [KKR's investors] get? What actual structural problem is being solved? I would venture to guess that wealth inequality was [exacerbated] by KKR’s transactions.”  

While this is an important step for employee ownership to be recognized throughout the country, I believe there needs to be more protection of rights to employees of employee ownership businesses that Pete Stavros builds upon for KKR and Ownership Works.  

• KKR's equity grants come without voting rights to what should happen to the company, such as selling the company.  

• They also depend on continued employment with the company, tying employees to the firm--unlike ESOP grants, which do not.  

On a positive note, the conversations and analysis that KKR inspires will hopefully lead to researching employee ownership, including other potential models that address some of these questions. For more on those models, check out the Employee Ownership Expansion Network's Employee Ownership 101.