Monday, August 8, 2022

Carlyle Runs Off Yet Another Top Executive

Carlyle Group CEO Kewsong Lee's contract negotiations went so poorly he is no longer with the private equity underwriter (PEU).   It generally takes two to tango, however Carlyle's executive turnover has been far greater than other PEUs.  

Lee shared the CEO role with Glenn Youngkin in 2017.  He became sole CEO in 2020.  The relationship between Lee and Youngkin has been characterized as acrimonious.

Potential successors included Mike Cavanaugh, Daniel Akerson, Jerome Powell, and Randal Quarles.  All left to go to other firms, most private equity.  Carlyle's executive retention problem is more than doing soulless work.

Glenn Youngkin lasted a few years as co-CEO before leaving to start a nonprofit focused on job skills/training.  Carlyle co-founder Bill Conway promised $1 billion to organizations that would help get the unemployed jobs via his Bedford Falls Foundation..  It's not clear how much money Glenn's nonprofit received from his former boss.  Youngkin parlayed his short period in nonprofit work into the Virginia Governorship.  

Stepping back into the Carlyle's interim CEO role is the same Bill Conway.  Did Conway share any bitterness regarding the way Youngkin was treated by Kewsong Lee?  Or did Lee want "too much, too fast" for staid Carlyle co-founders, David Rubenstein, Bill Conway and Daniel D'Aniello?  

No one will know until someone breaks a non-disclosure agreement.  

Update:  Today's news revealed two other Carlyle departures, Jay Sammons and Ashley Evans (who recently made partner).

Update 8-9-22:  Insider's leaked the story of genteel co-founders taking umbrage at Lee's brusque management style.  And this is the fifth or sixth heir apparent to leave the firm?  Spin at best, horse hockey at worst.

Those genteel Carlyle co-founders rudely refused to respond to their CEO's contract proposal.  FT reported:

Lee’s proposed contract, which would have paid him hundreds of millions of dollars if Carlyle performed well, also risked expiring with little value if its shares fell. It also required Carlyle’s share price to remain high towards the later years of his contract.

Update 8-10-22:  Carlyle executives continue to flee the firm.  Global Head of Investor Relations Nathan Urquhart is headed to hedge fund Coatue Management.

Update 8-13-22:  FT ran another story on the conflict between Lee and Carlyle's founders.  The split resulted from to power struggles.  Carlyle's PEU triumvirate won.

Update 8-15-22:  Carlyle announced record assets under management of $376 billion and celebrated by canning CEO Kewsong Lee.

Update 8-18-22:  Bloomberg reported Kewsong Lee left due to conflicts with founders Bill Conway and David Rubenstein.

Update 9-1-22:  NYT ran a story on the conflict stating "the clash at Carlyle shows, there is little to stop their founders from clawing back power."

Another source of friction was Mr. Rubenstein’s so-called family office, which makes multimillion-dollar investments with his personal funds, according to three people familiar with the matter. Mr. Lee and other leaders felt Mr. Rubenstein’s investments were becoming a distraction for Carlyle employees who had to navigate a thicket of rules that were intended to avoid Mr. Rubenstein’s prioritizing his personal interests over those of the firm and its clients.

Mr. Rubenstein represented Carlyle at places like the World Economic Forum in Davos, Switzerland.

Mr. Lee at times grumbled to colleagues about what he saw as Mr. Rubenstein’s attempt to serve as the face and voice of Carlyle.

Carlyle's rich white male billionaire founders are not to be messed with.  That's the takeaway from this crafted leak or series of leaks from inside Carlyle.  Kewsong Lee, like Glenn Youngkin, has an NDA he cannot violate.

Update 10-12-22:  Mike Cavanagh got promoted to President of Comcast.  Their press release mentions Cavanagh's brief stint as co-President of Carlyle.

Update 11-9-22:  Carlyle reached a separation settlement with Kewsong Lee:

Carlyle said it will pay Lee $1.405 million as base salary and bonus as well as $1.95 million as stock dividends as a part of the separation agreement that terminates at the end of this year. The Washington, D.C.-based firm also agreed that most of Lee's restricted stock options would be allowed to vest between November and February next year.

Update 12-20-22:   The Grinch will not bring Carlyle a new CEO this year as the search will push into 2023.  Peter Clare finally could get his chance, now that Glenn Youngkin and Kewsong Lee are gone.

Update 12-22-22:  BlackRock considered buying Caryle in a move into alternatives but decided it would be an ill fit.

BlackRock, the world's largest asset manager, had been considering acquiring Carlyle, to expand into alternative assets, but decided against pursuing it, three people with knowledge of the talks told FT. The size of the deal, the firm's turmoil, and a cultural mis-match played parts in the decision, they said.

Update 1-14-22:  Carlyle's search for a CEO to replace Kewsong Lee may be nearing a close.