Across the Atlantic and in Europe alike, private equity faces the same accusation: that it enriches investors at the expense of the people who work in the companies it buys. The industry’s answer is familiar. It brings capital, accelerates growth, professionalizes management and creates jobs.
Yet one question is largely missing from this debate: when a fund sells a company at a profit, how much of that gain goes directly to the employees who helped create it? The question is not only a moral one: it is economic, legal and political. And the answers differ strikingly from one country to the next.
In the United States, a growing number of sponsors grant equity to rank-and-file employees and publish the results. In the United Kingdom, the government has spent a decade encouraging owners to sell their companies to their own staff, by exempting the seller from capital gains tax on the sale. In France, the law has allowed shareholders since 2019 to share up to 10% of their capital gain with employees, under favorable tax treatment. French private equity, whose business is precisely to buy, grow and sell companies, has barely used it.
First and foremost, a buyout debate
We should first be clear about what we are discussing. Private equity covers very different businesses, and the question of sharing does not arise in the same way in each of them.
In venture capital, it has largely been settled. A young growth company cannot compete with large corporations on salaries: it attracts and keeps talent by opening its capital. Stock options in the United States, and their French equivalent, the BSPCE, are granted well beyond the founders, often down to the first engineers and salespeople. Sharing value is a condition for the model to work, not a concession.
In growth capital, the fund is usually a minority shareholder. It backs an entrepreneur who remains in charge of the company’s pay policy; it can propose a sharing scheme but cannot impose one. The French PACTE contract nevertheless remains open to it: any shareholder selling its shares can commit to share its own capital gain.
It is in buyouts that the question becomes central. There, the fund takes control, sets the value creation plan with management, structures the deal through an acquisition holding and acquisition debt, designs the management package, and decides the timing and terms of the exit. All the value is realized on the sale, and the fund holds the keys. In other words, if a buyout does not share with the whole workforce, it is not for lack of means: it is a choice. Buyouts are also where criticism of private equity concentrates, and where the contrast is sharpest between the few managers who share in the gain and everyone else. Most of the American examples below concern companies acquired by funds.
The stakes are not marginal. According to France Invest’s annual activity surveys, French funds completed nearly 4,800 buyout financings over the past ten years (2016-2025), investing some €134 billion, and their annual number more than doubled, from 337 in 2016 to 724 in 2025. This total counts transactions, not distinct companies: the same company bought in a secondary buyout may appear several times. But nobody knows how many employees of these companies received a share of the gain when they were sold. This debate is therefore addressed first and foremost to buyouts.
America: equity for the rank and file
The most visible movement is American. As of December 31, 2025, KKR reported that more than 80 of its portfolio companies had awarded equity to more than 180,000 non-senior-management employees.
The approach has since spread beyond a single firm. Ownership Works, a nonprofit that helps sponsors design these plans, reports 201 shared-ownership programs covering more than 291,000 employees outside the C-suite. It says $2.2 billion has already been paid out to workers across 45 liquidity events (exits, but also dividends and interim payouts), with more than $16.8 billion in total wealth expected. Its model is simple: employees receive equity at no cost, without investing their own money or giving up wages or benefits.
These figures deserve caution. They come from the programs’ promoters, not from an independent evaluation, and they do not show that broad-based ownership has become the norm in American private equity. But they demonstrate something important: sharing with employees can be made a visible, measurable part of a fund’s investment policy.
American industry associations have supported the movement without codifying it. The American Investment Council, private equity’s lobby in Washington, showcases its members’ programs as an argument for the industry, but has made no collective commitment. ILPA, the association of institutional investors, is among the organizations that supported the launch of Ownership Works in April 2022, with the goal of creating at least $20 billion in wealth for working families by 2030.
In Europe, industry associations are quieter still. In the United Kingdom, the BVCA, now UK Private Capital, has campaigned since 2021 for the Enterprise Management Incentives regime, a stock option scheme for key employees of small companies, to be opened to fund-backed businesses; it has asked for nothing on all-employee plans and responded to none of the public consultations on Employee Ownership Trusts. Invest Europe measures private equity’s contribution to employment, not the sharing of exit gains with employees. France Invest is the only one to have made written commitments.
The contrast with France is striking. The French industry association, France Invest, has adopted a charter with written commitments, but publishes no results. In the United States, there is no collective commitment, yet funds act and publish their figures.
The movement has its critics. As early as 2022, advocates of employee ownership saw it as a public relations exercise meant to defuse anger over inequality.
Britain: the state as matchmaker
The United Kingdom took a different route. Since the Finance Act 2014, an owner who sells a controlling stake to an Employee Ownership Trust has benefited from capital gains tax relief, which until recently was total.
The British scheme is not a private equity tool. It is, if anything, an alternative to a sale to a fund. But it shows how far a government can go to steer ownership toward employees, and how fragile such incentives are: in the Autumn Budget, with immediate effect from November 26, 2025, the relief was cut from 100% to 50% of the gain.
France: a forgotten history
France is the most paradoxical case, because the link between French private equity and employee participation is an old one. Profit-sharing schemes, mandatory employee participation and company savings plans date back to the early years of the Fifth Republic. General de Gaulle saw “participation” as more than a pay mechanism: a way to transform the relationship between capital and labor, without abolishing private property, by associating those who bring capital more closely with those who bring their work.
Then, in 1984, came a law of particular relevance to this industry: the RES, or rachat d’entreprise par les salariés, an employee buyout regime. Employees could take over their company through a holding company financed largely by debt, a mechanism borrowed in part from the American leveraged buyout.
This scheme helped launch the first French LBO funds. Initiative & Finance was founded in 1984, the year of the law, and LBO France in 1985. The techniques developed around the RES (acquisition holding, acquisition debt, debt repaid from the company’s cash flows) went on to shape French buyout practice.
In other words, French LBO funds owe part of their origins to a scheme designed to make employees the owners of their company. Forty years later, the industry has mastered the tools of value creation and value capture. Associating the whole workforce with the exit gain remains marginal.
The French tool: a law tailor-made for funds
The 2019 PACTE law created a contract allowing a shareholder to share with employees part of the capital gain realized on the sale of its shares. The mechanism is tightly framed: a company savings plan must already exist, the commitment runs for at least five years, at least three years must elapse before the sale, and the amount shared is capped at 10% of the gain.
At first sight, this timetable fits private equity perfectly. A fund buys a company with a holding period of several years, aims to increase its value, then organizes its exit. Why not provide, from the day of investment, that employees will share in the value created?
The figures suggest the industry has not asked itself that question. In France Invest’s ESG survey covering 2023, only 4% of respondents reported having signed a PACTE sharing contract. The result must be read with care: it reflects survey responses, not a census of all fund-backed companies. But it raises an uncomfortable question: why has an industry whose business is to buy, grow and sell companies made so little use of a mechanism designed to share the proceeds of that growth?
The answer starts with a real objection: the capital gain belongs to the fund’s investors, and the manager cannot give it away as if it were its own money. That objection must be taken seriously.
Employee shareholding funds: making workers real owners
Sharing the gain is not the only route. France has an older and potentially more powerful instrument: the fonds commun de placement d’entreprise, or FCPE, an employee shareholding fund. Employees hold units in the fund, which in turn holds shares in their company.
In a buyout, this changes the logic. Employees no longer receive a slice of the financial investor’s gain; they become investors in their own company, from the acquisition onward, and benefit from the change in value at exit. French law even provides a specific “buyout FCPE,” which, according to the French Labor Ministry, can invest alongside outside investors without the employees needing to hold final control.
The formula has real drawbacks. Employees who invest bear a risk of capital loss and concentrate their professional and personal risk on the same company. Unlisted shares are hard to value and to sell before an exit. And the scheme requires a legal structure, fund governance, valuation methods and exit terms.
These constraints are real. They are not insurmountable. France Invest’s March 2025 report on value sharing cites the case of Fidel Fillaud, where about 90% of its 200 employees chose to invest through an FCPE.
I used employee shareholding funds successfully myself in the buyouts of ALKAN and REVIMA. That experience convinced me that employees can be brought into the capital of buyout companies without reserving ownership for senior management alone.
Management packages: why stop at the executive committee?
Private equity did not wait for any law to share value with some of its people. For decades, management packages have been central to buyout structuring: managers, and sometimes key staff, invest in the company and share in the exit gain.
The logic is sound. Managers drive the value creation plan, make the decisions, carry the responsibility and often put their own money at risk. Aligning them with the financial investors works. A management package is not, in itself, an unjustifiable privilege.
But it raises a question the industry too often avoids: why should alignment stop at the door of the executive committee? Do technicians, engineers, salespeople and production workers not contribute to the value creation plan?
The real issue is not to abolish management packages but to complete them. A fund could provide, from the acquisition, one incentive scheme for managers and another for all employees, whether through employee shareholding, a share of the exit gain or another suitable formula.
Who pays? A manager is mandated to invest its limited partners’ capital and deliver the returns it promised. Handing part of the gain to employees reduces, all else being equal, what goes to investors. It would be too easy to accuse funds of selfishness without acknowledging that constraint.
But a fund that sets its sharing policy at fundraising does not surprise its investors. It offers them an explicit model, which they are free to accept or decline. Whether broader sharing actually improves retention, productivity and performance remains to be demonstrated. That debate should not be dodged.
It matters all the more because governments are watching. France overhauled the taxation of management packages in its 2025 budget, splitting gains between capital gains treatment and taxation as salary, within limits. The message is clear: what managers earn has become a policy issue. The industry knows exactly how to share exit gains with its managers. Why not bring the same ingenuity to the whole workforce?
The question private equity should be willing to ask
Private equity asks to be judged on the value it creates. That is a fair request.
But it cannot confine the discussion to the financial returns of its investors. Sharing value with employees, even if its impact remains hard to measure precisely, is itself a lever of value creation: it strengthens engagement, retention and each team’s contribution to collective performance.
The available evidence points that way without proving it. In the United Kingdom, the People Powered Growth study published in 2023 by the Employee Ownership Association finds that employees of employee-owned businesses are 8% to 12% more productive than those of a comparable group of companies. This is a correlation, and it concerns majority employee-owned companies, not buyouts. But it supports the idea that bringing employees into the capital can drive performance.
A company does not create value through its capital alone. It also creates it through its managers, its employees, its know-how, its customers and its investments. Recognizing that contribution does not mean that everyone should receive the same reward or bear the same risk. It simply means that the distribution of the wealth created deserves to be made explicit.
Four initiatives would open a concrete path:
1. Systematically consider gain sharing at every acquisition.
2. Agree with LPs on a transparent sharing policy, adapted to the company and the investment.
3. Publish the actual results every year: number of deals, employees who benefited, amounts paid. In France, the industry has committed to sharing but publishes no such figure. Ownership Works shows it can be done.
4. Extend value sharing beyond senior management, notably through employee shareholding in buyouts, with clear terms of access, financing, valuation and liquidity, and particular attention to the risk employees bear.
Conclusion: a question of credibility
Private equity has serious arguments to defend its economic usefulness. It finances growth, supports business transfers, backs international expansion and helps companies transform.
But at a time when its legitimacy is contested on both sides of the Atlantic, it holds an answer it still underuses: showing concretely what employees gain from the value created during its ownership.
The tools exist. Some are written into law, others into contracts. American, British and French experience shows that ambitious mechanisms can work.
Private equity has no need to apologize for creating capital gains. It should strive to share them as often as possible with those who helped create them.
Sources
United States
- Ownership Works, FAQ and “Companies & Case Studies”, accessed October 26, 2026; launch announcement, April 5, 2022.
- KKR, Form 10-K, fiscal year 2025 (as of December 31, 2025), and “Ownership Cultures” page.
- American Investment Council, “Private Equity Firms Offer Workers Ownership, the Opportunity to Build Wealth, and Strong Benefits”, July 1, 2024, and Private Equity Invests in American Workers, June 2025.
- Marjorie Kelly and Karen Kahn, “Are the Barbarians at the Gate?”, Fifty by Fifty, May 19, 2022.
United Kingdom and Europe
- BVCA (now UK Private Capital), response to HM Treasury’s call for evidence on EMI, May 26, 2021, and Autumn Budget submission 2025.
- UK Finance Act 2014, Schedule 37, Part 1 (capital gains tax relief on disposals to employee-ownership trusts); HM Treasury and HMRC, “Capital Gains Tax — Employee Ownership Trusts relief reduction”, Budget 2025 (November 2025).
- Invest Europe, Private Equity at Work, April 2025 (2023 data).
- Employee Ownership Association, People Powered Growth, October 2023, p. 6.
France (in French)
- French Commercial Code, articles L23-11-1 to L23-11-4 (capital-gain sharing contract created by the 2019 PACTE law).
- Ministry of Labour, “Loi Pacte et épargne salariale : questions-réponses”, updated December 26, 2019, questions 45–46.
- French Senate, opinion no. 396 (1983–1984) by Étienne Dailly on the bill on economic initiative (employee buyouts, RES), June 19, 1984.
- Ministry of Labour, “Transmission d’entreprise : le FCPE de reprise”, January 12, 2024, as presented by LégiSocial, January 19, 2024.
- France Invest, Étude ESG – Indicateurs à fin 2023, November 2024, p. 53; value-sharing charter press release, June 8, 2023; Partage de la création de valeur, March 2025, pp. 18 and 26.
- France Invest and Grant Thornton, Activité des acteurs du capital-investissement français 2025, March 2026, p. 59 (buyout series 2016–2025).
- French tax authority (DGFiP), BOFiP BOI-RSA-ES-20-60, management packages, July 23, 2025.
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