Private Equity for Greater Good is a simple concept: an open invitation and call to action to private equity firms and other alternative investment firms to publicly commit to distribute a portion of investment gains derived from investments in portfolio companies to the employees of those companies who do not already participate in an equity plan.
The concept recognizes that US wealth inequality is large and growing. In 2019, the top 10% of American families owned 71% of wealth (including defined benefit pension assets), up from 62% in 1989, while the bottom 50% dropped from 4% to 2% over the same period. What drives the difference in wealth between the top 10% and the bottom 50% is equity ownership, both directly and through pensions. The top 10% of Americans by wealth own 89% of equities and mutual fund shares, and the top 1% alone owns over half. The bottom 50% owns less than 1%. For the bottom 50% of Americans, 82% of all assets are in illiquid form (real estate, consumer durables including automotive, and pensions). Half of US households have virtually no liquid safety net.
The program is also connected to the principle that wealth should be shared among those who create it in proportion to their contributions. Traditional incentive equity programs in private equity sponsored companies limit distribution of equity or equity like instruments to those who executive management believes will understand the value of and be motivated by such awards. That practice has often run contrary to the principle of sharing wealth with those that help create it as success could never be achieved without the contributions of non-management staff. A lack of familiarity with such programs has been viewed as acceptable justification to exclude this group from participating in the distribution of the wealth they helped create. Fundamentally, the understanding of or familiarity with a source of value should not govern a just claim to it.
Envisioned as an industry-wide effort, Private Equity for Greater Good aims over time to help shift the norms of incentive equity plan construction and employee rewards. Those who join Private Equity for Greater Good are encouraged to write a letter explaining their decision to embrace the principles described above and describing the other principles that motivate them.
Joining Private Equity for Greater Good is an enduring commitment. Those who make a commitment will be in the company of some of the country’s most well-respected private equity and alternative investment firms who acknowledge the responsibilities born by the industry and who have the courage to challenge the status quo.
Program specifics may vary based on elements unique to certain companies or investment structures. The Private Equity for Greater Good plan documents, which InTandem Capital designed in partnership with its counsel Goodwin Procter LLP (“Goodwin”), and related communication materials are being made available to all private equity firms who share similar beliefs and wish to participate. Goodwin will also administer the program at no cost. All that is required to join the program is a commitment to share investment gains in some measure with all employees who participated in creating success.
How it started
In March 2022, InTandem Capital Partners launched Private Equity for Greater Good alongside their commitment to distribute 5% of the investment gains from InTandem Capital investments from investments to all employees of portfolio companies that do not otherwise hold equity instruments. Private Equity for Greater Good was inspired by the prior efforts of Bob Patricelli, InTandem Capital Strategic Advisor and healthcare industry veteran, who worked with Congressman John Larson (D-CT) as the lead sponsor, and Tom Suozzi (D-NY) and Bill Pascrell (D-NJ) as co-sponsors to introduce HR 4962, The SHARE Plan Act (Share Holder Allocation for Rewards to Employees Plan Act), legislation aimed at incentivizing the broadening of equity ownership. Bob Patricelli is a successful healthcare entrepreneur and executive and has maintained an active interest in public policy since his days working on US Senate staff and in senior positions in the Nixon and Ford Administrations earlier in his career. Bob’s interest in developing tax policy that would be effective in addressing the growing income and wealth gaps in the United States prompted our exploration of tools for the private sector and in particular, private equity. Private Equity for Greater Good is a program born from that exploration that enables the private equity industry to fulfill its obligation to do the same by establishing a new standard for management equity plan design that would ensure investment gains are shared not just among management shareholders, but rather among all employees that contributed to their achievement. Bob’s long-time colleague and friend, Elliot Cooperstone, consulted on the development of the SHARE Plan and offered an early endorsement.
InTandem Capital Partners
InTandem Capital Partners
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