Bloomberg on Employee Ownership in Public Companies and Private Equity

A June 13 Bloomberg Businessweek article,KKR Gives Industrial Gives Industrial Workers a Piece of the Action, highlights the rationale behind sharing ownership broadly, as the private equity firm KKR has now done in three large transactions. It also illustrates the resistance the idea has met in public companies. Pete Stavros, who started the program at KKR, told Bloomberg that "treating employees like owners and business partners" is a good idea that, in combination with employee involvement programs, helps the company grow by creating ways to do "a million little things better."

By contrast, Bruce Ellig, a former Pfizer executive and leading writer on executive pay, said the programs are hard to manage and get harder as companies grow. Shareholders also resist diluting equity to share it more widely, preferring to concentrate ownership in a few executive hands. In fact, comprehensive research has decisively shown size is not related to the performance of employee ownership plans (Publix, an employee owned company, has over 180,000 employees) and that broadening, not narrowing, employee ownership leads to better results.