Does private equity have an advantage in attracting managerial talent?
You can give managers a chance to make much more money than they could make in a publicly traded company. The famous example is Dave Calhoun, who left GE to go to a Carlyle portfolio company, Nielsen, with reportedly a chance to earn nine figures if it succeeds. He was a vice chairman of GE (GE, Fortune 500), but his compensation would be relatively capped. We could give him enough of an incentive that the wealth he could create would be much more than he could ever have gotten at GE, no matter how high he might have risen. He also invested a lot of his own money, and can make a profit on that as well. So yes, people can make more money in private equity if they perform. If you don’t perform, you can lose money. You’ve become a very active philanthropist. The world does not lack for problems to be solved. How do you decide where to focus your efforts? There’s no good answer, of course. Anybody who gives away money is mostly looking at things where they think they can make a difference.
