Private Equity Firm KKR Breaks the Mold by Sharing Ownership Broadly with Employees of Manufacturing Companies

Private equity investors typically share equity ownership with a select group of very senior managers. The conventional (if empirically wrong) wisdom is that the top echelon of management can "move the needle" on the value of a company, and only the top people understand and value ownership.

The Industrials group at KKR, one of the largest private equity firms in the world, has recently moved in another direction. At several manufacturing businesses, including recently sold companies Capital Safety and Capsugel, as well as current holdings CHI Overhead Doors, KKR has distributed ownership broadly to all employees. In the Capital Safety example, the company had a workforce of 1,375; hundreds of employees earned more than $100,000, and the lowest payout was well into five figures. At a time when half the U.S. population is estimated to have zero savings, this can have a real impact.

KKR's industrial companies also institute high-engagement work practices, with demonstrated efforts to invest in the workforce, improve the work environment (for example, by improving worker safety in manufacturing plants) and get employees more tied in to the company's mission. KKR partner Peter Stavros, who is the head of the Industrials group, told the NCEO that he believes this combination of ownership sharing and high-engagement work practices has made their manufacturing businesses much more successful.

For a short video on changes made at Capital Safety, go to https://vimeo.com/156303226 and use the password "KKR Industrials." Pete Stavros can be reached at [email protected].