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The job market may be strong, but the invisible threads that connect workers to their workplace are weakening.
Trends like “lazy girl jobs” and “quiet quitting” have gone viral in a post-pandemic world where young workers are trading ambition for balance. Actors and writers continue to strike. UPS employees were close to reaching a tentative agreement with their employer. In a recent survey, more than half of employees said they felt burned out from a demanding workload.
How would all this change if there were greater economic alignment between employers and their workers? If employees had more so-called “skin in the game”?
That’s the rhetorical question Pete Stavros keeps asking himself. As Co-Head of Global Private Equity KKRHe was a key advocate of introducing employee stock ownership plans at all companies the company buys for its $19 billion Americas fund.
These are effectively additional benefits distributed to the grassroots outside of traditional management share plans. Employees receive an equity stake in the company they work for; This is additional compensation on top of their regular wages and benefits, allowing them to share in any value added that the company delivers.
“So why would people do that? Because it’s just a better way of running a business in every way,” Stavros said in an interview for the Delivering Alpha newsletter. “It’s better for investors, it’s better for the company, it’s better for employees and, ultimately, it’s better for the communities in which they live.”
The latest deal, announced this week, involved RBmedia, a KKR-backed audio book publisher, which was sold to another investment firm, HIG Capital. Upon closing of this transaction, which is expected by the end of the year, all RBmedia employees will receive a cash payment based on their affiliation with the company. On average it is 100% of the annual salary.
Stavros said the company has now closed about nine of these deals, noting, “They’re some of the best.” He said the exits have returned three to 10 times the capital invested by KKR. More than 60,000 non-management employees have received a total of billions of dollars in value through these equity programs since 2011, the company said.
Stavros said that at KKR’s companies that used the program, churn rates fell and engagement scores skyrocketed. But he said equity couldn’t simply be issued to employees without support. He said there must be financial literacy, tax advice and education, and a way for employees to voice ideas and concerns — just like any shareholder would.
“So when done well, and as part of that holistic effort, it can certainly have an impact on worker dissatisfaction, leading to people walking out the door less often, being more involved in the work and caring , where the company is going.” ,” he said.
Stavros’ goal is to “see this launch across the industry.” He and KKR are founding members of a nonprofit organization called Ownership Works with a goal of creating at least $20 billion in wealth for low-income and diverse workers through shared ownership over the next decade. Through the non-profit organization, other private equity firms such as Apollo and TPG have also committed to advancing shared ownership within their own portfolios.
It’s still relatively early days – especially in an industry not known for rapid change – but the concept appears to be the antidote to worker dissatisfaction – one exit at a time.