The issue is one of financial literacy, making people feel part of the process and increasing their savings and wealth, Mr. Milken said. These companies perform better and have less turnover when employees feel they have ownership in their companies.
Ownership Works, a new non-profit supported by the Milken Family Foundation and a number of private equity firms including Leonard Green & Partners and KKR & Co., among others, aims to help some employees build personal wealth and savings through stock ownership. Ownership Works aims to create new broad-based equity programs that are not ESOPs combined with financial literacy programs for workers, said Anna-Lisa Miller, executive director, Ownership Works, speaking on the same panel.
One of the programs would give people who make less than $100,000 a year stock grants for free, said Andy Stern, president emeritus, Service Employees International Union, speaking on the panel. Mr. Stern added that the grants would not replace wage increases and that there are some standards being proposed that would require stock grants to be worth at least half of the person's salary.
Mr. Stern said he is also a member of KKR's sustainability expert advisory council.
The Washington State Investment Board, Olympia, supports the program, said Allyson Tucker, CEO of the board, which oversees $193.8 billion in assets, including $156 billion in defined benefit plan assets.
Speaking on the panel, Ms. Tucker said the stock grant program is very important. She noted that Washington State Investment Board has a "very large exposure" to private equity and the board's experience is that general partners are attentive to LPs' desires if investors are thoughtful and consistent. As of Dec. 31, the board's actual allocation to private equity was 27.5%.
Board officials are "strong believers in the ownership mindset private equity brings to" their portfolio companies, and broadening employee ownership is " very well aligned with the private equity model," Ms. Tucker said.
When companies create and sustain an ownership mindset among employees and do it well, it can be "transformative for workers," she said. It creates "circular engagement" between employees and managers that drives productivity and it is inclusive because now stock ownership is concentrated with a small percentage of people, Ms. Tucker said.
The program is very well aligned with ESG initiatives, especially those aimed at workers, she said.
Ms. Tucker encouraged other asset owners to ask their GPs to consider using broader equity ownership programs at their portfolio companies. These programs are a competitive advantage and is "a real shot" at having a meaningful impact on addressing income inequality, which has an enormous destabilizing impact, she said.
Mr. Milken said that about four years ago, he brought John Danhakl, a managing partner of Leonard Green & Partners, and about 14 other heads of private equity firms to the White House. Mr. Milken said he told them that they "were ground zero here on the backlash and they had a bull's eye on their chests" because they can't control 30,000 different companies in America without people asking them about their responsibility for income inequality.
