Thursday ThrowBack


The sun is shining, oil prices are sinking and Yankee fans get two weeks to gloat/celebrate before getting smacked in the playoffs (Me bitter? You bet). In other words, it’s time for some Thursday ThrowBack.

First up is yesterday’s lament that former Gillette chief Jim Kilts got a plum private equity gig. Specifically, I oppose Kilts accepting a $165 million golden parachute, when his brokered sale of Gillette to P&G resulted in countless layoffs and plant closures. Karan writes: “I think your words on Jim Kilts are a tad unfair.You say that he made himself rich while he made others poor. Okay that may be true, but he also made a lot of other people rich or richer. Don’t get me wrong — there are a lot of questionable PE deals and situations where people get paid for creating little value — but I don’t think Jim Kilts falls under this umbrella.He turned Gilette around.Are you going to write bad things about people who make themselves rich, improve things for consumers, but in turn put other companies out of business?” Ralph adds: “Kilts was hired to create stockholder value.He did that in spades. That is what he was paid for.”

I agree Ralph, which is why he earned a hefty salary while serving as CEO. But the $165 million package gets paid on his way out, when he is no longer creating anything. Who benefits other than Kilts himself? That deal is the labor equivalent of blood money, as it was only “earned” by agreeing to put other people out of work. Does a CEO have no responsibility to his employees? Could he have not used some of the $165 million to help out ex-Gillette workers? Karan, your point is well taken. But I believe there is a difference between putting other companies out of business by growing your own company (thus adding jobs), and taking an obscene payout that directly leads to the suffering of others.

A former UBS pro writes: “You forgot to mention that Kilts was hired by his buddy Blair Effron, who had been Gillette’s coverage banker for years at UBS. He was pretty hands-on, which is uncommon for a group head… perhaps this job is just returning a favor for a high-paying mandate.” And then there is K: “Three investment bankers and a greedy CEO without any real private equity experience between them. Sounds like cocktail party rock-stars that think highly of themselves but no real experience. Kind of group I love to hate.”
*** Moving on last week’s discussion of Spark Capital investing in “late night entertainment” company TwistBox. Alex writes: “One thing to keep in mind is that pension funds don’t actually have the legalground to choose non-universal moralities over returns. They have a legalfiduciary duty to the fund and its constituents to make the best investment decisions and generate the best returns possible. Now, the folks that oversee those professionals may decide to make those type of moral or political choices (for example,a state government may decide to mandate that its pensionmaynot invest in acertain country like Iran or Syria), but without those types of requirements placed on the investment professionals, they should always be choosing return.”

Rick asks: “How do Sharia-compliant LPs deal with leverage and interest in light of the Muslim proscription against lending/borrowing money? It seems to me that there’s almost no US fund or portfolio company that would be truly compliant.” Good question. Anyone have an answer?

*** Andy noticed an unusual participant in the recent $60 million Series D round for Amicus Therapeutics: “Interesting to see Och-Ziff in the middle of that venture group doing the Amicus Therapeutics deal.I’m sure they are expecting the venture returns like everyone else in the group, but for them to be a long term holder there must be something else.Market disrupting technology that will influence a long or shorttrading position in a public company? Key view on research that may have similar implications? Always interesting when hedge funds nose around venture capital deals.”

*** Shawna asks: “I know you are a Boston guy, but are you ever returning to the West Coast (other than weddings in LA)?” Yup. I’ll be in Portland, Oregon on October 25 for the Venture Northwest event, where I’ll do a “keynote interview” of John Connors, the Ignition Partners VC who previously was CFO of Microsoft. Also, I’ll be in San Fran on Nov. 6-7 for Buyouts Symposium West. Hope to see some of you there…

*** Finally, are you an MBA candidate who runs your school’s private equity and/or venture captial club? If so, please drop me an email. I’m preparing something you might be interested in…