Perspectives on Employee Ownership in Private Equity
Perspectives on Employee Ownership in Private Equity
A brief overview of employee ownership in private equity
When a business grows, it becomes more valuable. Whoever owns the company –- its stock- -benefits from that growth. There are many ways companies can sell or give ownership to their employees, one of which is called phantom equity, a model increasingly used by some private equity investors. Those future promised payouts fluctuate with the value of the company, and are realized when and if a company is sold.
In a New York Times article, a former Colson Group employee by the name of Terry Endres gives his experience with Blue Wolf Capital. For Endres, the value, timing, and likelihood of his payout were unclear, so when offered a higher paying position somewhere else, he took it—giving up his promised equity.
Terry’s story is reflective of the broader questions employee ownership advocates have about this new, growing form of employee ownership. Melissa Hoover, Director of Special Projects at The Democracy at Work Institute, says “You’re not going to get private equity companies investing in worker power; there are other mechanisms for that.” Ownership Works, for its part, offers training and how-to guides to incorporate employee input and build an ownership culture.
Go Deeper:
Read the original New York Times article.
Read my recent article about one instance of private equity-based employee ownership
Read Minseo Kim of EO+WD’s article on The Skepticism Surrounding Ownership Works
