I believe you're seeing things through a US lens there. Many of these small Mittelstand companies are incredibly durable because they don't have high loans and they don't have investors.
Also, the idea here is not that it's a great investment (although it usually is), but that it transfers power to experienced employees. Imagine if you and your coworkers owned enough company shares so that you could veto the CEO together.
Sure, if employees owned more than 50% of the company then they'd have more "seats at the table". In my experience the employee poll is negligible though from a "power" point of view.
My point I guess is that there's no materially different upside to owning shares where you work, or just shares outside. And shares outside diversify your income stream.
If there is a material difference in terms of power, well then I guess that's different.
Also, the idea here is not that it's a great investment (although it usually is), but that it transfers power to experienced employees. Imagine if you and your coworkers owned enough company shares so that you could veto the CEO together.