Pete Stavros, the Co-Head of Global Equity at KKR, one of the largest and most powerful private equity firms in the world, created, funded, and continues to lead both of these groups. While they are distinct organizations, and promote somewhat unique variations on shared equity, they frequently conflate some of the examples of success provided by Ownership Works with the agenda of Expanding ESOPs. They are also guilty of conflating the societal and individual benefit of current ESOPs with their entirely different form of equity compensation that they wish to label as an ESOP. And finally, the common leadership and funding further complicates discernment by the public and lawmakers between the two.
OWNERSHIP WORKS
Pete Stavros funded and launched Ownership Works in late 2021, then formally
introduced it in April 2022. He created the group in part to influence public policy
and encourage private equity firms to include employee equity in their business
models. However, after a little more than a year, this group shifted its focus away from
government intervention and has focused entirely on incubating and testing shared equity arrangements within private equity firms. Its stated goal is to generate $20 billion in wealth for employees within 10 years. The ESOP Association takes no issue with this.
However, while that effort is certainly better than nothing, it is important to put that figure in context by understanding just how much wealth is already controlled by private equity investors and how little that $20 billion over ten years represents. Private equity firms currently hold more than $12 trillion in wealth and over a typical ten-year period realize an average 13.5% annualized rate of return – or as much as $30 trillion in gains over the same 10 year period. That means, in its stated ten-year period, these experiments in shared equity will only account for .066% -- less than seven one thousandths of their total investment returns. Another point of context is to compare the wealth that existing ESOPs are already generating and distributing. Current ESOPs already hold more than $1.7 trillion in wealth and distribute more than $13 billion in employee wealth every month. Think of it this way: current ESOPs will distribute more wealth before Christmas than Ownership Works hopes to create in a decade. Think of it this way: current
ESOPs will distribute more wealth before Christmas than Ownership Works hopes to create in a decade.
EXPANDING ESOPS
Organized in early 2024 and formally launched in late September 2024, this group
was also created and funded by Pete Stavros of KKR. The organizers created this group
with the stated intention of changing government policy around ESOPs. It is critically
important to understand that despite its name, they are not seeking to “expand ESOPs”
as they have been known and existed for the last five decades. Rather, their agenda is to create an entirely new kind of what they want to call an Employee Stock Ownership Plan under the Employee Retirement Income Security Act of 1974 (ERISA) as well as an entirely new structure of tax deductions and deferrals for which only private equity firms sponsoring the plans would be entitled. Additionally, they want to receive significant exemptions from ERISA and protections from employee beneficiaries to completely shield their valuation of shares and plan administration from oversight and litigation.
Initially, the group posted detailed policy proposals and shared them directly with The ESOP Association. But when they formally launched, they removed those details from their website. The leadership replaced the content with a significantly abbreviated version, presented to the public as 'principles.' The major tenets of their detailed policy agenda are subsumed in these principles and remain intact, even when filtered through their public principles. Those principles are discussed at length in other articles.
