Working Ownership

Employee stock bonuses date back to the 1920s. Louis Kelso pioneered the employee stock ownership plan (ESOP) model in 1956. In the 1970s, Industrial America first introduced the idea of full employee ownership. As the American economy shifted from industrial to service-oriented, family-owned to PE-backed, and from Middle America to the 1%, the “social contract” between the Executive Team and the line worker started fraying and breaking down. Instead of both classes prospering in robust economic expansion, the line worker salary stayed stagnant while the C-Suite grew 400x. With the wealth “gap” inside Corporate America now becoming more like a seemingly insurmountable wealth “canyon,” employee resentment and dissatisfaction crept back onto the production floor, and margins suffered.

2010: Pete Stavros, son of a line worker and high riser within the PE group at KKR, becomes an early believer in the creation of a more effective social working contract. Pete eventually runs the Industrial PE team for KKR and soon realizes the best way to achieve high performance with his portfolio companies: employing a fully distributed ownership plan for all employees. Spectacular financial results followed, and KKR earned a reputation for doing the right thing. KKR’s SOP in the past 47 US buyouts is to implement a form of this “all-in” ownership program. Stavros would take this wealth creation philosophy outside KKR into the non-profit world by founding Ownership Works (“OW”). OW is a non-profit designed to help all companies improve their performance and return dignity and education to the line workers. The key is changing the ethos and mindset of a traditional hierarchical structure, which chokes off the best ideas from the employees closest to the action. This article discusses the history, process, and examples of employing a fully distributed ownership plan for all employees.

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