After piloting share-ownership in KKR’s manufacturing portfolio, Stavros ready to expand the model
by Corey Rosen
Pete Stavros, a partner and co-head of private equity for the Americas at KKR, the third-largest private equity fund in the world, told the Wall Street Journal that he and his wife plan to contribute $10 million to launch the Center for Shared Ownership. The organization will focus on employee ownership through funding research, providing resources for companies to help set up plans, and possibly pushing for legislation and government support.
Stavros told the Journal that “Giving ownership to lower-level employees better aligns their interests with those of shareholders and managers, makes them more engaged, and creates a stronger culture. And at a time when rising inequality has led to populist uprisings and geopolitical instability, awarding shares to blue-collar workers can lead to great social cohesion by helping lower income workers—many of whom are racial minorities—build wealth.”
The Center for Shared Ownership will focus on employee ownership through funding research, providing resources for companies to help set up plans, and possibly pushing for legislation and government support.
Stavros has structured a number of KKR deals so that employees get individual equity grants as part of the transaction. When the companies then go public or are sold again, the employees can cash in their awards. Typically, employees have ended up with about 10 percent of the equity value, a stake that has translated into tens of thousands of dollars per person. When KKR took Gardner Denver public in 2017, $100 million was granted to employees (about 40 percent of one year’s pay). Other companies where KKR has used this model include CHI Overhead Doors, Flow Controls, and Hyperion.
The KKR model differs from Employee Stock Ownership Plans (ESOPs), which are meant to hold stock for the long term and often end up owning 100 percent of the company. So while the KKR program is more transient than ESOPs, it provides substantial equity to employees who are normally excluded from any of the wealth transfers that occur in private equity deals. Their involvement, and now this new initiative from Stavros, promises to raise the awareness and legitimacy of employee ownership as an important model for the economy. Stavros originally learned about employee ownership when getting his MBA at Harvard and connected with the NCEO for his thesis. He has supported our work in the past, and NCEO looks forward to working with him in his new effort.
You can see an interview with Pete Stavros with Bloomberg News here.
This article was originally published at the NCEO employee ownership blog, February 19, 2021.
Corey Rosen is the founder of the National Center for Employee Ownership and a senior staff member.