Employee Owned

CNG and Others Reflect on Business Models Where Employees Have an Ownership Stake

Employee Owned


When private equity firm KKR began discussing a potential investment in specialty films producer Charter Next Generation (CNG), it wasn’t necessarily the dollars that stood out. It was the investment firm’s interest in offering employees a stake in the Chicago-based company, says Kathy Bolhous, CNG’s CEO.

“It’s a differentiator,” she says. “Other private equity firms are starting to make it happen for their employees, but KKR has been the leader in this space.”

In 2021, Pete Stavros, co-head of global private equity at KKR, and his wife founded a nonprofit called Ownership Works designed to educate and promote broad-based employee ownership. The nonprofit partners with other investment firms, financial organizations, and public companies to help generate equity for employees, particularly lower-income and diverse workers.

Employee ownership is a goal shared by Bolhous, whose working-class parents struggled financially due to a lack of pensions and savings.

“This has been a dream for me to do,” she says. “Everyone in the company helps create value. So, it makes sense that everyone in the company should be rewarded with equity and can share in the value that we create.”

The dream became reality in 2021 when New York-based KKR purchased CNG alongside Leonard Green & Partners LP and a subsidiary of the Abu Dhabi Investment Authority.

After the transaction, KKR awarded share certificates to all CNG employees, who will receive a payout the next time the company is sold, as long as they are still working there. Shares are also distributed to employees who join the company after the KKR deal.

“This is the right thing for the investors. It is the right thing for our employees,” Bolhous says. “It’s a better way to structure a business when everyone benefits together.”

Indeed, advocates argue that an ownership stake spurs employees to take a more active role in creating value and driving profits. But it also reduces turnover and can be attractive to potential employees, according to a 2019 survey sponsored by the Employee Ownership Foundation and conducted by researchers at Rutgers University in New Jersey. Turnover at employee-owned companies is three times lower than at conventionally owned businesses, according to the survey.

Colonial Roots

Employee ownership is not a new concept. The idea can be traced to at least the early 1700s. Benjamin Franklin relied on a form of employee ownership, for example, when he expanded his printing business in the 1730s, according to the Employee Ownership Foundation, a nonprofit based in Washington, D.C.

The modern push for employee ownership began in the 1950s with the creation of the first employee stock ownership plan (ESOP), a structure developed and pioneered by economist and attorney Louis Kelso, who died in 1991. An ESOP involves selling a company to a trust that then distributes shares to employees.

ESOPs are one of several forms that employee ownership can take. Some firms like KKR and CNG award a fixed number of shares to employees. Others gradually sell shares to employees, allowing them to accrue a larger and larger stake. Worker-owned cooperatives are another less common model.

A newer model in the U.S. market is called an employee ownership trust. Well-established in the United Kingdom, the model hinges on a trust that holds some or all shares in a company on behalf of employees, according to Project Equity, an Oakland, California-based nonprofit that advocates for employee ownership.

The model is cheaper to establish and maintain than an ESOP, but it does not benefit from the same tax breaks. Profits made by an ESOP company, for example, are not taxed.

Federal data on employee ownership tends to lag current conditions, experts say. However, according to the Oakland, California-based National Center for Employee Ownership, nearly 6,500 ESOPs existed in the U.S. in 2020, and there were about 4,000 examples of other forms of employee ownership.

Employee-owned companies in flexible packaging include Wikoff Color Corp. in Fort Mill, South Carolina. At Wikoff, ownership translates into a strong sense of employee loyalty, pride, and ownership as well as high levels of employee engagement, says Mark Lewis, the company’s president and CEO. “People are accountable for making sure they do their part to drive results for the benefit of themselves and others,” he says.

KKR, meanwhile, is not the only investment firm embracing the concept. Several private equity firms have sprung up to buy companies and convert them to employee ownership. One is HB Capital Management LLC, based in Camp Hill, Pennsylvania. Its backers include HB Global, an employee-owned heating, ventilating, and air conditioning services company. Another is Bethesda, Maryland-based Apis & Heritage Capital Partners, which is focusing on companies whose workforces predominately include people of color.

“All of that is creating a positive synergy and excitement in the marketplace around what employee ownership really means,” says Edward Renenger, co-chair of the ESOP group at Stevens & Lee, a law firm in Reading, Pennsylvania. He also is president of SES ESOP Strategies, an affiliated company that advises businesses on ESOP transactions.

More business owners are at least becoming aware of the option, which is likely to funnel into more transactions, he says.

Owners who sell to an ESOP are typically motivated by a desire to give back to their employees and ensure their businesses remain fixtures in their communities, he says. While owners receive fair market value for their companies, the trade-off is that the price may be lower than what a strategic buyer would pay—that is, a buyer willing to pay a premium because it is rolling up companies in a specific industry or taking out a competitor.

The transition to an ESOP can also be complex. As something of a shortcut, a growing number of owners are selling directly to companies with ESOPs in place.

“The real key is building that ownership culture and getting employees to understand how the work they do on a day-to-day basis creates value for the company.

Building an ownership culture takes time, but we are well on our way.”

Kathy Bolhous, CEO at CNG

Government Push

The federal government also has been deepening its commitment to employee ownership. Under the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act passed in 2022,

the U.S. Department of Labor launched an employee ownership initiative within the Employee Benefits Security Administration. The initiative educates workers and owners about employee ownership and provides technical assistance to explore the model.

The government also has been fine-tuning regulations around employee ownership. One effort involves the process of valuing companies in an ESOP transaction—that is, how much employees end up paying for their company. In the absence of clear guidelines for valuation, sellers have faced litigation over the years alleging that employees overpaid.

The U.S. Department of Labor has filled in the gaps through guidelines embedded in settlement agreements over the years. But experts say it does not offer the most rigorous approach to valuation.

New federal regulations, however, are in the works to bring greater clarity. “Done properly, this can be a really good set of rules that the community as a whole will be able to rely on for ESOP transactions,” Renenger says.

Thinking Like Owners

While the ownership stake is an incentive to remain with CNG, it also motivates employees to consider the impact of their work on the company’s bottom line. “The real key is building that ownership culture and getting employees to understand how the work they do on a day-to-day basis creates value for the company,” says Bolhous, who describes it as a journey. “Building an ownership culture takes time, but we are well on our way.”

The company shares do not replace traditional retirement benefits, she adds. CNG continues to offer a 401(k) plan with a company match and quarterly bonus programs based on performance.

While the ownership journey starts with the equity award, it includes sharing CNG’s financial results and the changing value of company shares with employees. Each company plant, meanwhile, boasts an owner board where CNG posts key metrics at the beginning and end of each shift. “That is a hands-on way to understand if they’re moving the needle,” Bolhous says.

Another key element is helping employees find and use their voices to suggest better ways of doing everything from reducing waste to filling open positions. “It really is about cultivating a culture of ownership where all employees understand the key performance indicators and, importantly, how to act to improve

the company’s performance. Inspiring these behaviors and mindsets in our employees means they will show up every day engaged and empowered as an owner of the business,” says Lisa Alteri, CNG’s chief human resources officer.

For managers, the change means being sure that employees know their voices matter, Alteri says. “We have a responsibility as a leadership team to continuously role model the behaviors that we expect all employees in the organization to live while also amplifying and sharing employee wins, best practices, and lessons learned,” she explains.

CNG also allocates capital funds to improve working conditions at each plant and allows employees to vote on how they use the funds, Alteri says. Employees have upgraded locker areas, expanded on-site lunch programs, and created outdoor break areas, among other enhancements.

The company also assigns funds for plant employees to make donations to charities of their choosing. “That’s impactful and rewarding for our people to give back to the local communities they live and work in. It is not a decision that is made by corporate,” Alteri says.

Although it has only been two years, Bolhous and Alteri say, they see the impact of ownership. For example, the company is posting significant improvements in employee engagement and retention. “Our employees are much more interested in what they can do to make the company more profitable,” Bolhous says.

And despite the broader economic headwinds, shares in CNG have done well, she says.


Joel Berg is a writer and editor based in York, Pennsylvania.

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