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Chobani’s Shared Capitalism Bonanza

The Greek yogurt company just awarded its full-time employees a bunch of valuable shares in the company. Should more companies follow suit?

By Dwyer Gunn


(Photo: Daniel/Flickr)

Earlier this week, Hamdi Ulukaya, the founder and CEO of yogurt manufacturer Chobani, told his 2,000 full-time employees that they’d be getting shares worth up to 10 percent of the company’s value when it’s sold or goes public. The New York Timesestimates that, given Chobani’s current valuation, the average employee payout will be $150,000, with the longest-serving employees getting payouts of up to $1 million.

“I’ve built something I never thought would be such a success,” Ulukaya told the Times, “but I cannot think of Chobani being built without all these people.”

While Ulukaya’s gesture is unique in its magnitude, the United States is actually an international leader in profit sharing and employee ownership programs, both of which fall under the umbrella of what economists describe as “shared capitalism.” According to research conducted by economists Douglas L. Kruse, Richard B. Freeman, and Joseph R. Blasi as part of the National Bureau of Economic Research’s Shared Capitalism Research Project, 45 percent of private sector, for-profit employees in the U.S. participate in some kind of shared capitalism program (either a profit sharing, gain sharing, employee ownership, or stock option program).

“This is the sort of thing where you can get everyone from Democrats to Tea Party Republicans to agree.”

As inequality has increased in recent years, a growing number of economists, including Freeman, have also suggested that shared capitalism might be a way to more equitably distribute the gains of the one percent. The idea has caught on in the political sphere too: Last July, Hillary Clinton announced her support for a tax credit for businesses that adapt profit sharing programs.

“If we believe that an increase in the capital share is a major part of this inequality, then the question becomes what can we do to have the capital ownership widely distributed?” Freeman told me when I interviewed him earlier this year for an article on wage stagnation. “And that either means workers owning part of the companies they work for, or it means profit sharing, which means they own part of the profit stream.”

Of course, there’s another reason it makes sense for companies to get into the shared capitalism business: It more closely unifies the interests of workers with the interests of management. In a shared capitalism model, everyone benefits when workers are more productive and innovative. Ulukaya alluded to this when he told the Times that, now, his workers will be “working to build the company even more and building their future at the same time.”

Ulukaya is probably right. As part of the NBER’s Shared Capitalism project, Freeman and his colleagues examined how shared capitalism schemes affect the behavior of employees. They found that shared capitalism is associated with “greater attachment, loyalty, and willingness to work hard; lower chances of turnover; worker reports that co-workers work hard and are involved in company issues; and worker suggestions for innovations.” A separate study commissioned by the United Kingdom’s revenue service found that such programs increased productivity by 2.5 percent in the long run.

Shared capitalism is good for workers too — it increases worker wealth and is positively associated with measures of worker well-being like pay, benefits, wealth, job security, labor-management relations, and trust in the firm.

It’s not, however, a cure-all for what ails the American economy. For starters, Freeman and his colleagues found that shared capitalism is most effective when it’s combined with other worker-friendly policies (employee involvement committees, lower levels of supervision, high-performance policies, and so forth).

More importantly, however, is the fact that these programs are not evenly distributed throughout the economy. Here’s what Kruse, Freeman, and Blasi had to say in the introduction to their NBER research on shared capitalism:

If all workers were equally covered by shared capitalist modes of pay and if firms with shared capitalist compensation had lower inequality among their employees than other firms, then shared capitalist pay would likely be associated with lower overall inequality. In fact, shared capitalist arrangements are disproportionately distributed in the economy. While there is little difference by gender in participation in these plans, African Americans and men with disabilities are less likely to be paid by shared capitalism than other workers.

In other words, the workers who benefit from these types of arrangements are often already somewhat privileged. Hamdi Ulukaya has done his part to more broadly share the profits of his company’s success, but the millions of minimum-wage fast-food workers around the country aren’t likely to see their financial situations change thanks to profit sharing any time soon. Of course, while shared capitalism programs may not fix the dual problems of wage stagnation and inequality, they’re better than nothing. They’re also, in Freeman’s opinion, one of the few politically viable options on the table today.

“This is the only serious thing other than re-building the unions, which doesn’t strike me as very plausible,” Freeman told me. “This is the sort of thing where you can get everyone from Democrats to Tea Party Republicans to, at least on principal, agree.”