How Bad Is Bain?

Unbeknownst to most observers of the 2012 presidential race, there is one American private-equity firm that doesn’t quite fit the stereotype. Sure, it buys and sells companies for fun and profit, but this firm is not defined by corporate swashbucklers in bespoke suits. Many of the people it hires are Dockers-wearing number-crunchers, geeks rather than Gekkos. Several top executives are Obama megadonors.

The firm’s name? Bain Capital.

Last week, continuing a campaign theme, the firm starred as the anti-hero at the Democratic National Convention, where former employees of Bain-owned companies testified to its heartless-robber-baron ways. But within the private-equity industry itself, the operation that Mitt Romney helped start has long been viewed as pretty tame. A staffer at a rival firm puts it this way: “If you had to pick a P.E. firm to be the evil one, it wouldn’t be Bain.”

True, Bain is no saint—it has conducted all the layoffs, tax-avoidance schemes, and noxious dividend recaps you’ve read about. It’s been especially aggressive in seeking the fee waivers currently under investigation by New York attorney general Eric Schneiderman, which allow its executives to dodge higher tax rates by repackaging management fees as capital gains. But overall, Bain lies outside the dark heart of private equity. Having its headquarters in Boston puts it off the Manhattan private-equity power grid. And it’s no longer a member of the Private Equity Growth Capital Council, the industry’s spin-happy lobbying group.

But the biggest difference might be its internal culture. Because many of its recruits come from Bain & Company, the consulting firm from which it spawned, its staff trends more wonk than bro. “Bain guys tend to be the smart kids that did really well in school, but maybe their clothes don’t fit exactly right,” says a former employee.

Another thing you’ll find at Bain: Democrats. One of the firm’s top executives is Steve Pagliuca, a prominent Obama fund-raiser and onetime Democratic Senate candidate. Another firm higher-up, Josh Bekenstein, has also supported the president. “Bain’s political leaning is far more split than almost any other firm I know,” the former Bain employee says. According to the Center for Responsive Politics, 42 percent of the candidate and party contributions made by Bain employees this election cycle have gone to Democrats.

If you want a better candidate for private-equity arch–bad guy, you might go with the Blackstone Group, whose CEO Steve Schwarzman once compared Obama’s tax plans to Hitler’s invasion of Poland. Kohlberg Kravis Roberts, which was co-founded by Republican Henry Kravis and took part in the largest and potentially worst buyout in history (a $45 billion acquisition of Texas energy company TXU, which is now saddled with debt and gasping for air), would also have fit the bill. It sounds damning that the Bain-controlled office-product-maker Ampad laid off several hundred employees. But after KKR took over a company called First Data, the company cut at least 1,700 workers.

“Bain’s track record isn’t bad, relatively speaking,” the private-equity worker says. But it does have one thing going against it on the PR front, which is that the guy who started the firm is running for president.

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How Bad Is Bain?