In the days leading up to his 57th birthday on Friday, Kewsong Lee was getting restless. Months earlier, the now-former CEO of the Carlyle Group had proposed a $300 million salary package that would cement him as one of the most powerful figures in finance for the next half decade.
The Korean-American dealmaker played the role of Wall Street titan while privately harboring growing doubts. His bosses, the three seventy-year-old billionaire founders of Carlyle, hadn’t responded to the nine-figure wage move; Lee feels his situation is becoming untenable, close confidants said. He thought his days were numbered.
On Sunday, the trio — David Rubenstein, Bill Conway and Daniel D’Aniello — finally showed Lee the door, unwilling even to discuss his proposal. It threw one of the world’s largest private equity firms into chaos, wiping more than a billion dollars from its market value.
The messy exit revealed deep rifts within Carlyle, once dubbed the “Ex-President’s Club” — the firm had for years acted as a revolving door between the world’s political and financial elites, and previously counted George HW Bush and John Major as advisers.
But a firm that established its dominance three decades ago by forging political connections in the Washington, DC clubbing world has been overtaken by more aggressive New York rivals like Blackstone, KKR and Apollo – and seems uncertain, like them should adapt.
In almost any other company, a $300 million salary demand would seem both bold and deaf when ordinary workers are in trouble. But Lee’s was a stock-based deal that would reward him if he could restore Carlyle to its former glory. And his rewards were far less than competing firms.
Ultimately, Carlyle’s rejection was more about power than money. “He wanted complete autonomy,” said a person close to the situation. “The founders gave it to him. Then they took it away.”
Young Lee grew up in Schenectady, New York, an industrial town three hours north of Manhattan, where his father taught economics at a state university. His parents taught him to play the piano from the age of four; later he took up the violin.
As a teenager, he won a scholarship to Choate Rosemary Hall, the elite Connecticut boarding school where John F. Kennedy studied. At Harvard he met Zita Ezpeleta, his wife of three decades, with whom he has two children.
In his 20s, Lee joined private equity firm Warburg Pincus, considered by many to be the genteel statesman of the cutthroat buyout industry, where he oversaw many lucrative deals.
He made “a big mistake,” says a former colleague. He was the key figure behind Warburg Pincus’ costly decision in 2007 to invest in MBIA, an insurer hit hard by the subprime mortgage crisis.
As of 2013, Lee had not received a managerial role at Warburg. Conway, the architect of Carlyle’s private equity business, recruited him as a first lieutenant. It was a crucial moment. Carlyle was listed on public markets and needed to grow quickly.
Externally, the firm maintained an aura of power, reinforced by its proximity to Washington — its headquarters are a short walk from the White House, and Rubenstein had close ties to the Obama administration. Carlyle had bought interests in defense and aerospace companies during the Bush years, which were cast as villains in filmmaker Michael Moore’s Fahrenheit 9/11.
But internally things got chaotic. The founders, billionaires after Carlyle’s listing in 2012, moved in different directions and the firm made bad acquisitions and launched niche products that struggled to break even.
By 2017, Carlyle’s stock had fallen below its market price. Its founders entered philanthropy sideways. Lee and Glenn Youngkin, a well-loved 20-year veteran, have been named co-chief executives.
Seizing the opportunity, Lee handled Carlyle’s acquisitions and credit investments while Youngkin handled smaller operations. “He made a brilliant strategic decision on day one,” said a contemporary.
But the consolidation of his power made enemies of Lee. “He was constantly working towards becoming CEO and then ousting Youngkin,” says another former colleague. “He wanted to know if you were in this program.”
Still, he prevailed and became the sole chairman of the board when Youngkin — now Republican governor of Virginia — departed in 2020. But Lee still had a difficult task, sometimes managing the conflicting desires of co-founders who hadn’t fully gone. “They were a two-headed monster when it came to strategy,” said a former adviser.
Lee also managed Carlyle’s dual identity. The company shares its headquarters between Washington, its historical center of power, and New York, the epicenter of finance. This geographic and symbolic divide has widened during the pandemic. From New York, Lee had some success merging subscale companies and hiring new executives while pushing Carlyle into credit, real estate and insurance investments – trying to replicate much of what made Blackstone a giant.
Ultimately, his failed pay move showed that the old guard in Washington was not on his side. For one insider, it underscores the company’s identity crisis: “The center of gravity of the company has moved north, but not necessarily the center of power.”