The author is Professor Sinny of Chinese Management at Cambridge Judge Business School.
In October 2024, Global Private Equity Group KKR announced the sale of Geohazard mitigation business geostatistics of over $1 billion, five times the original investment. A unique aspect of the transaction was that GSI employees shared a $75 million payment, some receiving up to $325,000 each.
KKR included the stakes of employees six years ago when purchasing geostatistics specializing in emergency Earth slide repairs and rock prevention, but it was an incredible departure from the 1980s. The company’s leveraged buyout model then won the Sobrickett “The Barrier of the Gate,” the title of the business book of the era.
Even more surprising, Pete Stavros, co-head of private equity at KKR, led the creation of ownership by 2030, a PE industry initiative that generates wealth for workers through employee ownership. KKR has nearly 50 deals, including Workers’ Stock Awards, selling $10, selling 1.6BN.
Such strategies seem to be beneficial when wealth and employment become central and central to public conversation. Donald Trump courted billionaires during his campaign to rescue American workers and promised tax cuts.
Test it yourself
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Does the KKR model suggest that it is possible to have your own cake and eat it? Or does the model remain fundamentally harmful to workers, although it is intended to improve public perceptions of companies?
Traditional ownership structures such as publicly available companies and venture capital and private equity investments are often seen as an increase in inequality by pouring disproportionate amounts of profits into owners, while employee revenues do not rise at the same rate. Employee ownership addresses this by allowing workers to benefit financially as the company grows.
In the UK, recent inheritance tax changes have boosted employee ownership. Employers can avoid new taxes if they sell at least 50% of the company to a trust in which the beneficiary is an employee. Known as Employee Ownership (EOT), these account for more than 90% of the UK’s 2,037 staff-owned companies, according to the Employee Ownership Association.
EOT is also known as the “John Lewis Model” owned by staff since 1929 after the UK’s largest employee-owned retailer. In 2023, there was £12.3 billion, 80,000 employees and more than 360 retailers.
Another form of employee ownership, the Workers’ Cooperative, dates back to the British law of 1852, unlike EOT (EOT controlled by the Trustee), where workers’ owners have a more direct voice in the decision-making of the company. The largest in the world is Mondragon Corporation in Spain. It is a coalition of diverse companies, including banks, grocery chains and over 10 technology-centric companies. With 80,000 employees, the company generated 11 billion euros in 2023, maintaining a 6:1 wage ratio between the best and lowest earners.
A popular model in the US is employee stock ownership planning. With ESOP, we allow employees to allocate shares over time and cash out when they retire or retire when the shares are acquired from them at fair market value.
These shares are held in separate trusts and voting rights are on leave with the ESOP trustee designated by the board, so the employee has no direct legal ownership or control over the company’s operations. The largest Publix Super Markets has 1,376 stores, over 255,000 employees and retail sales of $54.5 billion as of 2022. It is estimated that it is 80% owned by current or former employees (the remaining 20% is held by the founding family).
Critics of KKR’s approach contrast its model with traditional employee ownership. Employees are legal structures designed to help employees build wealth and endure longer than traditional PE transactions.
However, Stavros said: “Regardless of the model, employee ownership drives the incredible engagement and cultural change of some companies, and has a limited impact on others. What’s far more important than a particular form of ownership is the strength of the company’s leadership and the degree to which they make intentional and continuous investments in people to create a ‘ownership culture’. ”
Marjorie Kelly, a longtime advocate of employee ownership, argues that KKR’s model is more like a one-off cash bonus than actual employee ownership. Corey Rosen, founder of the National Center for Employee Ownership in the US, believes that the short holding periods of most PE transactions undermine the ownership culture of employees, which is considered an ESOP’s profit.
Supporters of the PE model refute the locking of employee assets until the ESOP model leaves the company, and concentrates individual wealth in one company.
PE companies often position employee ownership as “win-win,” but the model is undoubtedly a bigger winner as it can help ensure higher returns and generate more business.
For example, GSI employee turnover rates fell to 50-17% after implementing the stock plan. As Stavros told FT behind the Money Podcast in 2024, “When you stop suddenly losing half of your workforce each year, you can unleash a lot of growth.”
Employee ownership also helps to ensure more transactions. For example, when Simon & Schuster sold to KKR in 2023, publisher’s media chairman Richard Sarnoff praised KKR for his plans for employees to “participate in the interests of ownership.”
However, Kelly argues that the PE industry is causing harm to the community and its employees. She cites offensive PE tactics that lead to significant unemployment, and concludes that KKR’s approach is a step forward, but is “a step in the rapidly moving escalator.”
Stavros refutes such critiques. “When I see what workers are getting, I think there’s too many entities for someone to shrug it and say, ‘Oh, that’s just. It’s a fake,'” he told CBS News.
Questions for discussion
Read more:
Private equity experiments on workers’ ownership
Employee share ownership is a perk worth expanding
Consider these questions:
•Is employee ownership initiatives by private corporations a real effort in reform or a strategic move to improve public awareness? How can you evaluate this?
•What distinguishes KKR’s employee ownership approach from traditional stock awards in high-tech companies such as Google and Facebook, as well as employee ownership models such as John Lewis and Mondragon?
•What explains the timing of a private equity employee’s ownership embrace?
•How can companies ensure that employee ownership is converted into meaningful decision-making power rather than merely symbolic participation?
• Should employee ownership be considered a right, not a privilege, of the modern economy?
•How does employee ownership restructure the traditional division between labour and capital?
