The Power of Employee Ownership: NVIDIA's Millions to Main Street Windfalls

I was captivated by Josh Brown and Joey Fishman's recent discussion about NVIDIA's extraordinarily successful Employee Stock Purchase Plan (ESPP). The wealth generated for employees is remarkable, with some amassing fortunes in the millions. For example, a mid-level employee who consistently maxed out the ESPP for 18 years accumulated shares worth $62 million. NVDIA’s story is a powerful example of a company sharing its success with those who create it.

However, this isn't just an isolated story. It illustrates a more significant movement towards broad-based employee ownership gaining traction across various sectors. Leaders like Pete Stavros at KKR are championing this model, extending ownership to employees at companies that may not be on the cutting of artificial intelligence but can create a culture where employees from the C-suite to the shop floor “think like and act like owners.” Perfect employee-shareholder alignment is achieved when employees become wealthy in direct proportion to the increase in shareholder wealth.

Take, for instance, the example of CHI Overhead Doors, a garage door manufacturer in Arthur, Illinois. When KKR acquired CHI, they implemented an employee ownership plan. As one employee, Brad Edwards, put it, their initial reaction was that it was too good to be true. People would say that the private equity firm and C-suite executives were overpromising to motivate employees to increase performance and effort while the new owners reap the rewards. "What's the catch?" they wondered.

Despite initial skepticism, employees received life-changing payouts when KKR sold the business. Another employee described the situation: "This is something I have prayed for. It's personal to me." Some long-tenured hourly workers received checks as high as $400,000, while truck drivers got over $800,000! Even newer employees saw substantial payouts, some in the $20,000 to $40,000 range, which can be life-altering for many. For Brad Edwards, the payout was in the mid-six figures, and his family paid off credit card debt, started a college fund, and no longer needed to work night shifts.

This impact isn't limited to a single company or sector. Through his organization #OwnershipWorks, Stavros is dedicated to spreading this ownership model. He points out that this approach is not charity but "the right thing to do that also happens to be good business," it’s a "movement to change the way ownership is shared in Corporate America." The remarkable thing is that "this is an unbelievably popular idea with liberal progressives and MAGA Republicans and everything in between. You can make this palatable to anyone in the Spectrum. That's right, it's not a government handout. This is a benefit to work, and the outcomes are driven by performance and about performance."

My experience at Stern Stewart and Co., where we helped companies implement Economic Value Added (#EVA) and Value-Based Management (#VBM) systems, resonates with this movement.

We strived to create a culture of ownership by aligning incentives and emphasizing value creation. As Bennett Stewart said on Greg Milano's Creating More Value podcast, EVA makes "capital costly," so it can be used more freely, and the goal is to have managers "think like owners and act like owners" by "paying them like owners." We understood that "the only way any company can increase its NPV (“Intrinsic Value” - my emphasis) is to increase its EVA over time,” and “the real measure here is not EVA, it’s Delta EVA.” This focus on intrinsic value growth ultimately drives the success of these employee ownership models.

The key to these significant payouts, whether from NVIDIA or a company like CHI Overhead Doors, is exceptional business performance. Employees are not simply given money; they earn a share of the value they helped create. In the case of CHI, KKR made a tenfold return, a portion of which was shared with the employees as a reward for their hard work and dedication - and, most importantly, performance. NVIDIA's exceptional stock price performance has produced similar results.

The success of these diverse examples shows us that employee ownership isn't just a feel-good story; it's a powerful business strategy that aligns the interests of employees and shareholders. It’s about creating a culture where everyone wins when the company succeeds. As Pete Stavros observed, "We buy culture more than we buy strategy."

What are your thoughts on expanding employee ownership and its impact on business and society? Identify these ValueAligned companies, invest and profit. Share your insights in the comments.

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