Shared corporate ownership may be the missing path to the American dream
The American Dream – that fundamental promise of economic opportunity, social mobility and lasting security – looms large in our life stories. While access to this promise has been granted slowly and unevenly, at best, our nation has been a beacon of democracy and free enterprise.
Today, businesses remain too obsessed with the latter at the expense of the former, but we believe that democracy and free enterprise should go hand in hand. In a principled democratic society, every worker should have the opportunity to participate fully in the economy. This means that employers, large and small, must provide their workers with more pathways to ownership.
We know the power of ownership firsthand. Darren’s grandfather, a black man born in the Jim Crow South, had only a third-grade education, but as a porter for a Texas oil company, he participated in a profit-sharing scheme who made his work worthy, supported his family, and left him with enough stock to retire comfortably.
Pete’s father operated a grader for nearly five decades for a construction company outside of Chicago. Despite his long hours for many years, he never participated in the success of the company beyond an hourly wage. As a result, he never felt a sense of belonging or alignment and had few mobility options.
Today, millions of Americans feel the same way. Gone are the days when first-generation college graduates could see doors open that were closed to their parents. Instead, many Americans are now downward mobile.
Unlike previous generations, only half of American adults born in 1980 earn as much as their parents did at the same age. Two in five Americans cannot afford a $400 emergency, let alone save enough for retirement. Knowledge gaps widen the disparity: according to the Treasury Department, only one in three Americans is financially knowledgeable.
These trends – which evaporate opportunities for access, growth and prosperity – have dangerous implications not only for the economy but also for democracy. Our social contract is unraveling and we all have an interest in rebuilding it. Whether we work for hourly wages, salaried employment, or own businesses ourselves, one way to do this is to advocate for shared ownership plans.
What does it look like in action? Publicly listed pump maker Ingersoll Rand has introduced an additional shared stock ownership plan for its 16,000 employees in 2020. Employees who have been with the company since 2017 have earned free stock grants equal to 100% of their annual revenue.
In return, the company has seen its turnover rate drop from 20% to below three percent– even in the midst of the “great resignation”. Company employee engagement scores soared from 20e 90 percentilee. The impact on corporate culture and performance should be obvious but, to be clear, investors have also done extremely well.
Over time, recruitment giant Insight Global has increased its employee stock ownership, and today each of the company’s 4,500 employees has a path to stock ownership, starting with $5,000 grants with a eligibility increasing as they spend more time with the company. This has had a huge impact on their employee turnover and building their culture, with the employee turnover rate dropping by more than 60% since 2017.
Similarly, materials science company Hyperion Materials & Technologies granted ownership to its 2,000 employees in 2019, alongside a strong internal employee engagement effort. They saw their profit margins increase by 57%, along with a 72% increase in their employee engagement scores as measured by Gallup.
These outcomes – engaged, well-paid workers doing fair and dignified work in healthy businesses that can support them – can be replicated across our economy. Large-scale employee ownership can help us achieve this.
This is a crucial opportunity for everyone to participate in significant wealth creation. To that end, we are proud to collaborate as partners on a new non-profit organization called Ownership Works, which pushes for broader benefit sharing and a sustainable and inclusive economy.
This consortium of more than 60 (and growing) investors, pension funds, workers’ rights advocates, foundations, financial institutions and professional services organizations controls or influences trillions of dollars of capital and millions of jobs. This can have a profound social impact.
By 2030, we aim to create hundreds of thousands of new employee-owners and generate more than $20 billion in wealth for working families. We see potential to significantly exceed these numbers.
We can and must do more. Like all symbiotic relationships, free enterprise and democracy need each other to thrive.
We urge all stakeholders to join us in the fight for inclusive, democratic and free enterprise, where we can all find dignity and ownership of our work. Only then can we fully restore our social contract and rebuild an enduring American dream.
Darren Walker is President of the Ford Foundation, an independent organization that fights inequality and builds a future based on justice. Pete Stavros is the founder and chairman of Ownership Works, and co-head of Americas Private Equity at KKR. KKR is an investor in Hyperion and a former investor in Ingersoll Rand.
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