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Deities and demigods

26 January 2021 By Lauren Silva Laughlin

Good governance changes are welcome even when their catalysts aren’t ideal. Take Apollo Global Management, which late on Monday unveiled shareholder-friendly initiatives following an investigation into co-founder Leon Black’s relationship with convicted sex offender Jeffrey Epstein. The company’s shares bounced almost 4%.

The private equity firm will pursue removing supervoting rights that gave its co-founders control since the firm went public in 2011 and separate the roles of chairman and chief executive, with Black retiring as CEO by the end of July but retaining the other position. These are good steps but it would have been even better had the announcement not been conflated with a response to the independent law firm Dechert’s investigation into Black’s ties to Epstein.

Dechert said Black paid $158 million for Epstein’s advice, which far exceeded any amounts he paid to his other professional advisors. The law firm’s report said Black thought he was receiving advice that would have conferred as much as $2 billion or more in value. He made some of those payments “without negotiating written service agreements,” Dechert said, noting later that Black was under the misconception the payments would be tax deductible.

Granted, how its CEO conducts his personal financial affairs isn’t the company’s business. But the private equity firm could have improved its corporate governance well before this sort of catalyst came along. Especially given its share price performance is nothing to flaunt.

Apollo’s shares are still down 5% in the past year while those of competitor KKR have risen roughly a third. And Apollo’s total returns are less than both Blackstone and KKR since the investigation into Black started at the end of October. Sending Black fully into retirement could only help.


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