Private equity big talks job creation.
Private equity must do a much better job tracking and conveying its job creation record, said Carlyle Group co-founder David Rubenstein during a keynote speech today at the SuperReturn International conference in Berlin.
Rubenstein's comments were made in the context of increased public scrutiny on private equity, due to the presidential ambitions of former Bain Capital chief executive Mitt Romney. Romney has regularly claimed to have helped create over 100,000 jobs through Bain, even though the firm itself never kept records that could validate or dispute the assertion.
"No one wants to work in an industry that most people don't like," Rubenstein said, suggesting that only Congress and bankers enjoy less popularity than does private equity. "We need to do a better job of explaining what we do, and do a better job keeping statistics on job creation."
Rubenstein's implication, of course, is that private equity is a net job creator (contrasted to critics who claim it's a net job destroyer). To date, however, the only comprehensive study on such matters found that the industry only results in "a modest net impact on employment."
When asked about those findings, Rubenstein argued that the study had a fundamental flaw: "We don't know what jobs would have gone away if there hadn't been any private equity investment in the first place... Private equity usually invests in under-performing businesses. If the companies were doing fine, they wouldn't need private investment."
It's a good caveat to the study, but hardly one that would be rectified by better job-tracking from PE firms. After all, I can't imagine Carlyle announcing that it has created net 100,000 jobs -- 70,000 while owning companies and a hypothetical 30,000 jobs "saved" at businesses that otherwise would have gone under. I would expect more firms to begin publishing job creation data -- like this annual report from New Mountain Capital -- but industry advocates will continue to believe such statistics under-count job creation, while critics will continue to believe they over-count (for example, is PE firm still responsible for jobs gained/lost if a portfolio company goes public, and the PE firm is no longer controlling shareholder?).
So Rubenstein has identified part of the problem. The solution remains elusive.
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