Stagnant wages, long working hours and a wave of retiring business owners has fueled widespread worker disengagement in Japan. Nearly a dozen private equity firms are betting that an employee ownership strategy they’re testing in the US can reinvigorate their Japanese portfolio businesses.
Ownership Works, the nonprofit coalition of private equity firms led by KKR’s Pete Stavros, has set up a hub in Tokyo to help other PE firms replicate such programs in the country as the next phase of its goal of sharing $20 billion of wealth with workers by 2030.
“This marks the beginning of our effort to make employee ownership a globally coordinated movement, and we have plans to do much more,” Stavros shared on LinkedIn.
KKR is leading by example. Last year, it set up its first shared ownership program in Japan with Bushu Pharma, a portfolio business in the greater Tokyo area that manufactures pharmaceutical products. It followed with an ownership program for workers at Tokyo-based software developer Yayoi.
“The concept of shared prosperity has been incredibly resonant in this nation,” Ownership Works’ Anna-Lisa Miller told ImpactAlpha from Tokyo. “Our goal is for this to become the new norm in business, and our thesis is the more business leaders embrace this model, the more low- and moderate-income workers we will reach over time.”
Across its portfolio, KKR has distributed billions of dollars in payouts to 180,000 non-management employees across its portfolio of companies.
Ownership culture
Business culture in Japan results in high-levels of employee retention, but low levels of engagement, which costs the Japanese economy an estimated 90 trillion yen ($600 billion) annually. An aging population is fueling business acquisitions, including by many foreign companies.
“Ownership cultures have the potential to be transformative for Japan,” said Hiro Hirano, who leads KKR Japan and will chair the board of Ownership Works Japan. “By giving all workers a direct stake in the value they help create, we can strengthen engagement, foster innovation and contribute to sustainable economic growth.”
The other firms signing on to Ownership Works Japan include Apollo Global Management, L Catterton, Warburg Pincus, Ant Capital Partners, GLIN Impact Capital, Japan Growth Investments Alliance, Japan Industrial Partners, Nippon Investment Company and Polaris Capital Group. Some of the country’s biggest institutional investors, such as Dai-ichi Insurance, Sumitomo Mitsui, Norinchukin Bank and Japan Post Insurance, have also joined the nonprofit as members.
Since launching in 2022, Ownership Works has recruited more than 100 institutions to be part of its mission. It has facilitated the launch of shared ownership programs at 167 companies, some of which have paid out $1.3 billion in profits to 41,000 non-senior management workers. An additional $10 billion in employee wealth is currently held in still-active shared ownership plans.
