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Rubenstein Accosted at PE Conference

By The Prince ⋅ January 19, 2008 ⋅  Email This Post ⋅  Print This Post ⋅ Post a comment

This story was originally covered by The Deal, Dealbreaker, Dealbook, and PE Hub but The Prince couldn’t pass up the opportunity to comment on it.  This whole incident happened at the Wharton Private Equity Conference, a sold-out conference that had been advertised all over the place for the last month.  The one day event featured high profile figures in the private equity industry.  David Rubenstein, Co-Founder of the Carlyle Group, was delivering the keynote address this morning when he was interrupted by protestors.

So here is what went down.  Before Rubenstein could complete his first sentence protesters filled the room and stormed the balcony.  They began to chant loudly as 30-50 people steamed into the room passing out fliers and onto the balcony.  They unveiled a banner which you can see in the photos below.  The protestors were from the Service Employees International Union (SEIU).  After a short time a dialogue began between the protesters, the audience, and Rubenstein, lasting for between ten and fifteen minutes.  The finance professionals mostly left or waited for security but some students did respond to the protestors with one audience member calling the main protestor a "fat cow".  Some in the audience verbally abused the protesters.  SEIU, which has nearly 2 million members, has raised questions about whether the recent boom in private equity deals is good for the average worker.  Last summer, they organized a small demonstration in the Hamptons where protesters pretended to be billionaires and expressed mock opposition to raising taxes on private equity fund managers.  Definitely, have to give them points for creativity.

Their main gripe was related to Carlyle’s buyout of Manor Care.  Manor Care is a Toledo-based chain of 500 residences, which Carlyle bought last month for $6.3 billion.  Accounts of the disruption are all over the place.  Some people claim that punches were thrown and others said that it was just scuffling.  Almost all account say the situation was out of control and could of turned violent because of lack of security.  Despite the craziness of the situation Rubenstein remained on stage and agreed to address questions from a woman with a mega-phone, who said she was a Manor Care employee.   In response Rubenstein said "Obviously we’re interested in making the company better, that’s why we bought it," but sarcastically admitted that "It’s difficult to change a company in two weeks."  At one point Rubenstein said to the mega-phone woman that "I think a remedial English course would be helpful before going any further," but the context of that comment is unknown at this point.  After about 10 to 15 minutes of protest chants as conference-goers exited through the doors, Rubenstein left the stage and the police arrived to remove the protestors.

Now let The Prince disclose a few biases against organized labor.  Basically, The Prince believes labor unions are relics of the past possessing only token power.  Not only have they become irrelevant but they mistakenly think that they still have the ear of decision makers.  Now The Prince is from a middle class background as he has disclosed earlier.  His parents are middle class.  His grandfather was a mill worker for Alcoa aluminum and his other grandfather founded a grew an electronics components company.  The Prince still believes that labor unions are irrelevant and rarely serve the best interests of their members.  Furthermore, in industries where unions still exist they have consistently and naively fought hard to keep the rules the way they want them regardless of the economic realities.  The truth is that labor is now globally mobile, especially in manufacturing.  The mill worker in South Carolina has to compete with the mill worker in India and China.  The Prince believes that this reality is acceptable and irreversible.  While the global competitiveness among laborers from different doesn’t apply as much to SEIU since most of its employees work in the service sector, it doesn’t mean that SEUI has any realistic place in our society.  They are an organization from a time gone by desperately trying to set things back into the past.  Desperately trying to decrease the competitiveness of the U.S. economy to preserve the benefits of workers that have in some cases have benefits not even socialism could reasonably provide.  Private equity makes us more competitive by demanding results from management teams and making companies more efficient.  Unions are opposed to this philosophy.  Unions believe that companies exist to provide jobs and private equity firms understand that firms really exist to generate returns for owners.  The purchase of Manor Care by Carlyle was approved by shareholders and government regulators.  If the employees don’t like how they are treated they should seek employment elsewhere.

Now the commentary.  First of all, what an embarrassment for Wharton.  Come on guys, even state schools now that you need to provide security when you have big name speakers presenting even if you believe they are not controversial.  Some irony exists here as well.  Portfolio.com is reporting that after Mr. Rubenstein got to return to his speech he told the audience that private equity has entered a "purgatory age, where we’re going to have to atone for our sins a bit."

Furthermore, I think SEUI is making a mistake by focusing on problems with Manor Care’s level of service which are a result of pre-buyout management and don’t necessarily reflect poorly on Carlyle.  Carlyle just bought the company two weeks ago.  I they really wanted to make their case they should of focused on the possibility of pay cuts and employee cuts.  Yet, even that is a bit interesting because when the deal was announced Carlyle said they would not immediately lay people off.  The protestors basically just accused Carlyle of plotting do to layoffs even though the haven’t announced any layoffs. If SEUI really wants to go after private equity they need to learn a two of thing about how firms operate in the space.  This protest was completely ineffective and just makes them look bad for not even allowing Rubenstein to speak.  SEUI can’t seem to decide if they want to take a shot at the private equity industry or use this protest to try to protect jobs at Manor Care.  SEUI needs to get its message more focused and its priorities in order.

The best statement that Rubenstein made was when he said "Nobody ever asked me all around the world, how many jobs we created, how many factories we built, what kinds of changes we created," said Rubenstein. "If we want to function the way we want, we can’t just ignore Congress, labor unions and the media. We have to do a better job explaining to people what we do to make economies more efficient."  To hear out SEIU we have to quote Julie Eisenhardt of SEIU who said “We want to show that private equity has a responsibility to the community, just as any other investment class or industry would have. Right now, Carlyle and Rubenstein are involved in a number of different companies where there are serious questions about how they’re handling that responsibility.”

Rubenstein’s speech was pretty positive on the outlook for the private equity industry.  "I think you will see private equity come back in what I call the platinum age that will be better than ever before," he said.  Firms will become public institutions and grow to be 1,000 people and more, creating space for a new generation of private equity firms to sprout up and offer more options, he said.  Rubenstein also said that private equity firms need to better publicize jobs they save, companies they improve, and the wealth they create for retiree pensions and university endowments.  Managers who benefit from private equity’s high fees should contribute generously to charity, he added.  Rubenstein was upbeat about private equity’s prospects, predicting a "platinum age" as company prices fall to bargain levels, enabling investors to strike new deals, over the next year.

Here is a pdf of the flier that the protestors were circulating.  Hilarious.  It is amazing to believe that the protestors think that a room full of finance professionals and aspiring finance professionals are going to be convinced by such flimsy arguments.  It almost insults their intelligence.

By the way the comments section over at DealBreaker on the First Story 1 and subsequent Update are hilarious.  Well worth a read and there are comments from people that were there.

Photos of the Melee Courtesy of Dealbreaker with The Prince’s Commentary.

The Prince is going to bet that the guy in the black beret is not an invited attendee at the conference.  Just a guess.  Also, love the bullhorn indoors.  Was the venue really so large that you couldn’t shout your rants loud enough to be heard?

The classist nature of this photo is hilarious.  A poor overweight woman yelling upwards at a wealthy elevated Mr. Rubenstein.  Truly speaking truth to power.  I just wish the protestors would educate themselves about the business that Carlyle is in and why Rubenstein can’t just give the farm away to the employees of Manor Care.  Also, they really need to get their facts straight since,

You have to wonder what all the PE executives and students are thinking as they are watching this.  The executives probably left the room but the MBA students probably stayed to watch the action.

Rubenstein at Harvard

Rubenstein’s Short Bio

David M. Rubenstein is a Co-Founder and Managing Director of The Carlyle Group, one of the world’s largest private equity firms. Mr. Rubenstein co-founded the firm in 1987. Since then, Carlyle has grown into a firm managing more than $70 billion from 30 offices around the world.  Mr. Rubenstein, a native of Baltimore, is a 1970 magna cum laude graduate of Duke, where he was elected Phi Beta Kappa. Following Duke, Mr. Rubenstein graduated in 1973 from The University of Chicago Law School, where he was an editor of the Law Review.