Your questions answered
Our most commonly received questions are answered below. If you have a question you would like to ask us that is not listed below, please contact us and we will respond promptly.
Private Equity for Greater Good aims over time to help shift the norms of incentive equity plan construction and employee rewards to address income and wealth inequality and develop a more comprehensive compensation model for the industry. Member firms are in the company of some of the country’s most well-respected private equity and alternative investment firms who acknowledge the responsibilities borne by the industry and who have the courage to challenge the status quo. If this sounds like you, we welcome your participation.
PE4GG membership is continually increasing with greater awareness and appreciation for the impact of the program.
PE4GG recognizes the adverse consequences of US wealth inequality and aims to address it by restructuring equity incentive programs to include a broader base of non-executive employees. Further, the program is connected to the principle that wealth should be shared among those who create it in proportion to their contributions and that fundamentally, the understanding of or familiarity with a source of value should not govern a just claim to it.
There are now more PE-backed companies (approx. 16,000) in the U.S. than public companies (approx. 4,000) and the private equity industry, with approximately $5 trillion in assets under management, has the potential to meaningfully address wealth concentration issues. Beyond the size of the industry, as PE and alternative investment firms typically take active roles on the boards and management teams of the companies they sponsor, PE firms have the ability to change governance philosophy on a large scale to accomplish these objectives in ways that would be difficult for other institutional asset classes.
The impact of PE4GG will be felt in ways both large and small. For employees not previously able to share in investment gains, the economic potential could be extraordinary. Beyond the impact of goodwill associated with providing a wealth creation opportunity to all employees, we believe that understanding of and familiarity with the potential of the program will lead to enhanced employee engagement and satisfaction, increased retention and greater alignment and productivity. For society as a whole, with broad participation across the PE industry, we believe that the impact of PE4GG on wealth inequality in the United States could be felt for generations to come.
Program specifics may vary based on elements unique to certain companies or investment structures, but the concepts behind PE4GG are simple. InTandem Capital’s plan functions as follows: A phantom equity plan is created that entitles eligible participants to their share of 5% of aggregate shareholder gains during the term of an InTandem Capital investment. The plan supplements existing Performance Incentive Unit (PIU) programs dedicated to executive management. Plan size and implementation are binding as of the close of an investment and allocation of investment gain is based on service days earned during InTandem’s term as a shareholder. For full time employees that are employed on the date of a shareholder distribution, a service day earns a portion of the available distribution to the plan. All full-time employees of the company will participate, and shareholders, directors, part-time employees and PIU participants are ineligible.
Upon commitment, the program’s administrators will share a series of documents to enable relatively easy administration. First, PE4GG has created the program’s template legal documentation and will share those documents with member firms. Company communication templates are available as well to assist with announcement and implementation. Program administrators are available to review structuring questions and share implementation documents and details to support prospective members in their decision-making process.
No. Member Firms have the flexibility to implement the program how they feel appropriate so long as the PE4GG design principles are maintained. Those design principles include economic, eligibility, and other conditions to participation, however, utilization of the structure that we provide is not a condition.
No. Member Firms make a commitment to implement the program wherever possible. However, we acknowledge the various investment structures within the PE industry and the impediments that those structures present as it relates to program implementation (e.g., minority ownership, public company ownership, etc.). Small companies, short investment periods, non-control investments and other situations present unique structuring considerations that member firms may be free to take into account during implementation.
On the contrary, we believe wholeheartedly that investor returns will be enhanced through program implementation. Institutional investors in the private equity industry agree. As demonstrated by a recent survey of limited partners in the Coller Capital Global Private Equity Barometer (Winter 2021 – 2022), nearly 50% of LPs believe that the effect of incentivizing a larger portion of portfolio company employees on PE’s overall returns would increase returns over time. Only 6% of respondents felt returns would decrease. Employee recruitment, retention and engagement is a key business challenge of our time. PE4GG offers a powerful tool to address each in ways aligned with and in proportion to shareholder return.
Joining PE4GG is simple. Get in contact with the program’s administrators and commit to the creation of a binding equity incentive program for the companies in which you have the ability to do so. We welcome your submission of a Commitment Letter explaining your decision to embrace the principles described herein and describing the other principles that motivate them.
Upon agreeing publicly to the commitment, the program’s administrators will share a series of documents to enable relatively easy administration. First, PE4GG has created the program’s template legal documentation and share those documents with member firms. Second, company communication templates are available as well to assist with announcement and implementation.