Former Carlyle Group CEO Kewsong Lee remains under a multi-year nondisclosure agreement while Carlyle insiders tell stories about Lee's management failures.
A Dealbook interview allowed Carlyle co-founder David Rubenstein to bust Kewsong's chops in his usual indirect, manipulative manner.
Rubenstein talked about the longevity of founders --"maybe God loves them" --and suggested a new CEO might want to spend time with them.
Lee had been with The Carlyle Group for nine years, five as Co-CEO or outright CEO. He'd experienced a number of performance feedback sessions with Carlyle's board.
Rubenstein said Carlyle's infamous founders were not kept informed, a grievous error given their status at the PEU's biggest shareholder. He gave a dig at Lee for the stock being in low $30 a share range. The price was $38 a share before the high level divorce.
So Carlyle didn't have a perfect #1. How about the #2 guy? Rubenstein said:
"And we didn't have a perfect #2 there. That was one of the concerns the board had had for a long time, which is that there should be a person groomed to be a successor. And there wasn't one groomed."
Recall co-#1 Glenn Youngkin left the firm in Fall 2019. The board united firmly behind Lee at the point.
"We are fortunate that Kew is extremely well positioned to serve as our CEO, and I look forward to continuing to work closely with him on behalf of all of Carlyle’s stakeholders.” --David Rubenstein
"The Board is confident that Kew will build on the current momentum that has been achieved and we are excited to watch him lead and support the exceptional global team Carlyle has assembled.” --Bill Conway
COVID hit in March 2020 and Lee spent considerable time building a COVID portfolio of companies with the OneCarlyle team.
Rubenstein didn't mention the legions of top talent that fled Carlyle, mostly for other private equity firms. Many exiters ended up at the Federal Reserve Bank as Fed Chair (Jay Powell) or in other senior roles (Randall Quarles). One became CEO of Nasdaq (Adena Friedman), another CFO of Comcast (Mike Cavanaugh) and another CEO of General Motors (Daniel Akerson).
When asked if Carlyle would ever sellout Rubenstein responded "it's a publicly traded firm." Yes, Carlyle buys publicly traded firms all the time. However, he noted a change of control allows limited partners the right to get out of their specific Carlyle fund(s). LPs could pull their invested capital and not fulfill further capital commitments. I would venture a few LPs are unhappy as to how Kewsong was treated and might wish to pull their capital.
Andrew Ross Sorkin asked about Rubenstein's Family Office (Declaration Partners) and any problems that caused. The "nearly every billionaire does it" answer did not address Declaration Partners may compete with Carlyle on any deal and is a financial conflict of interest.
Generous Rubenstein closed his response with he'd referred deals Declaration Partners did not want to Carlyle. How is a CEO supposed to deal with a board member and founder dumping second hand prospects in his lap? Lee cannot legally give an answer.
"It's amazing how, if you have a good track record, you can charge almost anything."That's David Rubenstein near the end of the interview, not Bernie Madoff.
I'm sure Kewsong Lee felt he had a good track record as Carlyle CEO but founders and the board balked at his request, sent him packing and have been running him down since.
Oddly, over his nine year tenure with Carlyle there are no public pictures of Kewsong Lee with any of the firm's co-founders (Google image search). The public faces of Carlyle don't seem to share the spotlight.
Update 9-6-22: BOA gave a double downgrade to Carlyle lowering its price target from $58 to $33 per share. "We believe the management change could adversely impact employee retention, fundraising, and CG's business strategy, including M&A and signal risk to prior financial targets/guidance."
"One upside risk for the stock is Carlyle's $80B+ of dry powder, which the company can invest into a cheaper asset backdrop." The would be courtesy of former Carlyle managing director and current Fed Chief Jay Powell.
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.
