Even judged by the standards of the private equity world, the turnover at GE Equity has been exceptionally high as of late. According to a source at parent company GE Capital Services Corp., GE Equity has seen 18 professionals leave the firm in the last two months.
In addition, a European buyout fund that was launched in July by GE Capital’s structured finance group (BUYOUTS Aug. 2, p. 5) has been put on hold following the departure of Sharon Pipe, the only managing director of the fund with experience doing leveraged buyouts, according to a private equity professional who used to work at GE Capital. Prior to joining structured finance, Pipe was a managing director at GE Equity. The other two managing directors of the fund are Everett Smith and Brandon Blaylock.
A spokesperson for GE Capital declined comment for this article. Ms. Pipe could not be reached for comment.
GE Equity suffered a high-profile departure earlier this month when Jeff Coates, the firm’s top media and technology investor, and his team left to head up a new tech fund at TH Lee, Putnam Capital, a joint venture between Thomas H. Lee Co. and Putnam Investments.
At press time, no further information was available as to which additional GE Equity professionals had left, or what Pipe’s plans are.
Sources familiar with GE Capital, however, said the turnover there is related to General Electric Co.’s policy of not remunerating employees with a carried interest split-a standard payment plan at most other private equity firms by which professionals receive a percentage of the profits on investments.
“I’m not surprised [at the departures]. GE Capital is a great training ground,” said the former GE Capital professional. “But from a financial standpoint, they don’t pay private equity standards.”
“Most people understand the ground rules. You make a conscious decision to suffer from an income standpoint for the pleasure of working at such a good institution.”
The executive said that over the past ten years, GE Capital representatives had lobbied the parent company to allow investment professionals a piece of the carry, only to be “rebuffed at every turn.”
General Electric Chief Executive Jack Welch is opposed to carried interest remuneration for General Electric employees, sources said.
Instead, employees at GE Capital get a salary plus bonuses based on performance. According to the source at GE Capital, Pipe and the other professionals in charge of the Europe fund were to be paid as consultants in order to circumvent some of General Electric’s more stringent compensation policies.
The former GE Capital executive said the departures do not necessarily reflect discontent within the ranks of the company. GE Capital has long been a place for investment professionals to cut their teeth before moving on to top positions at other firms, he said. “Most people understand the ground rules,” he said. “You make a conscious decision to suffer from an income standpoint for the pleasure of working at such a good institution.”
The executive went on to say that professionals working at GE Capital have the advantage of being connected to such an immense corporation. “You have a knowledge base of so many people,” he added.