The rollout faced massive logistical hurdles, including 'dry income' tax traps in Europe and US legal limits on the number of shareholders a private company can have.
“This was a multinational company so it spanned different jurisdictions each with their own problems... in Western Europe, if you gave a worker ownership, a lot of times they get taxed on the grant and have something called dry income.”
Pete Stavros is leading a massive, real-world experiment within KKR to prove that giving rank-and-file workers equity isn't just altruistic—it's a superior business model for driving productivity.
“Why don't we have profit sharing or ownership or some way to get workers on the same side as management? Give workers a chance to get ahead financially and give the company a reason to start listening to workers.”
While private equity typically boosts productivity through aggressive cost-cutting, research shows this often leads to significant job losses and a degradation of product quality in sensitive sectors like healthcare.
“Research shows that while private equity ownership can boost a company’s productivity, it does generally result in job cuts.”
The inspiration for the model came from a 'lunch hour strike' organized by Stavros’s father, which highlighted the inherent friction when workers and management have diametrically opposed incentives.
“He organized all of the workers and... he would look at his watch and say, 'What a shame. We don't work the lunch hour anymore.' And he would send the truck away. And he and his colleagues intentionally ran the job out of material.”
The 'Capital Safety' pilot program resulted in surprise five-figure payouts for manufacturing workers, suggesting that worker-ownership could mitigate the societal costs typically associated with the PE industry.
“It was like, 'Oh my gosh, I've never had anything like this before.' She says it was five digits, $10,000 or more.”
