Thursday, September 1, 2022

Don't _uck with the Founders

It's difficult to lead in the shadow of politically connected billionaire founders.  Former Carlyle Group CEO Kewsong Lee learned that lesson while negotiating a contract extension with the Board of Directors. 

NYT ran a story on the conflict, citing sources with knowledge of the situation.  It stated:

 "the clash at Carlyle shows, there is little to stop their founders from clawing back power."

Billionaire founders never gave up their ability to direct government policy, especially taxes.  NYT referred to Carlyle co-founder David Rubenstein as "dispensing advice to presidents and senators" instead of undeclared lobbying for his private equity underwriting (PEU) interests.

Issues with Rubenstein got more press in the story.

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 super-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.

The industry says it owns companies that collectively employ 12 million U.S. workers, or about 7 percent of the labor force.  

Many U.S. citizens know the harm done by private equity underwriters (PEU).  We've learned that executive changes can install someone even worse.  I imagine that's a current Carlyle employee fear.

Update:  Rubenstein was on CNBC for a half hour today.  He talked about what makes a good investor.  Political connections and access to Uncle Sam's wallet were obliquely mentioned.  He mentioned his cryptocurrency investment without saying his family office Declaration Partners or Paxos.  The billionaire policy maker said Congress will stay hands off on crypto regulation.  He offered his thoughts on China and Europe.  The face and voice of Carlyle remains David Rubenstein.

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.