I find this testimony from Illinois workers utterly compelling. If this is an example of how private equity can work in the UK then I am prepared to suspend disbelief and support the expansion of our pension schemes into private markets.
This was a good day for Rhondda who got a pay- out of five times her salary for her shares purchased when CHI Overhead Doors was sold by KKR after 7 years of ownership. NuCorp Steel is paying $3bn for the business.
Pete Stavros of KKR is a popular guy. His Dad was a construction worker for 45 years but he couldn’t create wealth on an hourly wage. The “unbelievable increase in productivity” which drove the value of the business up, is a result of the hourly paid workers at CHI.
Rhondda listed the things she would do with her $175,000 windfall including going to Disney and giving a little to her church (she didn’t mention paying some into a 401k).
But can we expect more of this? If you were finding 20% of your pension pot heading to the likes of KKR could you see yourself sharing the gains you made with the people who made them? According to the FT you could.
KKR itself has helped start an entire non-profit group to evangelise employee ownership. Its ranks include the likes of McKinsey, Apollo and others not previously celebrated for their humanity. KKR insists share grants are not about charity but rather have boosted employee engagement and then ultimately profits and cash flow.
If I were to have my money (say my Nest money) invested in the private markets, I would like to think that this is the kind of investment my money would find its way into. It is entirely consistent with my values and it appeals to my entrepreneurial instincts.
Making my Money Matter is about more than saving the planet, it is also about making people like Rhondda more productive and more fulfilled. Private equity can find companies that do useful things – like make steel garage doors and make them fly. There are opportunities that publicly quoted companies rarely present
And I am quite sure that the price KKR realised on the sale of its stake to Nucorp richly rewarded its investors, I wish that I was one of them!
when the hourly workers found out
Henry
These employees were shareholders in the firm. This story is more spin than substance.
Con
What a terrible story! One firm selling to a large corporate and employees get rich is countered by dozens if not hundreds of stories where minority shareholders get nothing or are trapped owning shares in a small business they can’t sell (had a conversation with someone in exactly that situation yesterday). Future profit of that business now goes to the shareholders of that corporate.
Far better than the US share ownership schemes is the UK Employee Ownership Trust, where shares are owned by a trust for the benefit of the employees. Focus is not on share price, but on long term sustainable profit for the benefit of the employees. Better for the business, for customers, anmd for employees.
Great story. However it is worth noting, employees have taken risk here. They have been paid low hourly rates and got bonuses in shares, increasing the share count.
It is their risk which is rewarded here.
And in the U.S. share awards are common, including for firms which burn money. Many employees agree to be paid a smaller salary and stock. If the stock becomes valuable, they will have a good profit.