A pro-worker experiment in private equity

Key Takeaways

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  Broad-based employee ownership drastically reduces turnover - Implementing equity stakes for blue-collar workers, such as at GSI, saw quit rates drop from 50% to 17% as employees gained a tangible stake in the company's success.

  “Once you have, you know, more information being shared with you about the business... and by the way, you're going to participate in all the value that you're helping to create. That quit rate went from 50% to 17%.”

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  Employee equity serves as a strategic regulatory shield - By creating thousands of 'happy employee-owners,' private equity firms can improve their public image and gain political leverage when facing scrutiny from Washington lawmakers.

  “They can go to Washington when these deals work out, and they can say, here are, you know, tens of thousands of happy employees in your state or in your industry. They believe in what we're doing, and that really helps you.”

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  Private equity is shifting toward a business-building model - The industry is moving away from debt-heavy 'strip and flip' deals toward long-term growth strategies where motivated, equity-holding workers help drive higher investment multiples.

  “Not only has it been the right thing to do... but also delivers better investment outcomes and build stronger companies.”

Episode Description

Live event info and tickets here.  If your company got bought by a private equity firm, how would you feel? Maybe a little nervous? You might find yourself wondering if there will be layoffs. And you’d be right to worry about that. Research shows that while private equity ownership can boost a company’s productivity, it does generally result in job cuts.  But one private equity executive is trying to do things a different way – giving workers equity, little cuts of ownership in their own companies. To see if doing so can improve outcomes overall.  On today’s show, private equity is not widely beloved for its societal costs – job losses, product degradation, worsening inequality. And this one guy at this one firm can’t solve all of his industry’s ills. But for the past 15 years, he’s been running a large-scale, real-world experiment to see if giving workers ownership can fit into the big bad world of PE. And maybe lead to more … equity.  Recommended Listening/Reading: What Do Private Equity Firms Actually Do? The risk of private equity in your 401(k) Here's what happens when private equity buys homes in your neighborhood (newsletter) JScrewed  Find the Planet Money book. / Subscribe to Planet Money+ Listen free: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts. Facebook / Instagram / TikTok / Our weekly Newsletter. This episode was hosted by Mary Childs and Wailin Wong. It was produced by Sam Yellowhorse Kesler. It was edited by Jess Jiang with an assist from Marianne McCune, fact-checked by Sierra Juarez, engineered by Cena Loffredo with help from Jimmy Keeley. Alex Goldmark is Planet Money’s executive producer.  Music: Universal Production Music - "Make Me Want You," "Baby I Surrender," and "Bye Bye Bye" To manage podcast ad preferences, review the links below: See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. NPR Privacy Policy