The New Corporation Man
UPDATED: May 23, 2017 at 11:54 a.m.
David M. Rubenstein does not sleep much. He and his colleagues estimate an average of four or five hours a night—that’s all he says he needs. It’s also all he has time for. The 67-year-old co-founder of the Carlyle Group splits his time between managing one of the largest private equity firms in the world and advising dozens of nonprofit and educational institutions.
Rubenstein, whose estimated net worth tops $2.6 billion, chairs the boards of trustees of the Kennedy Center and the Brookings Institution, serves as a regent of the Smithsonian Institution, and sits on the boards of Duke University and the University of Chicago. He’s the vice-chairman of the Council on Foreign Relations, a trustee of the National Gallery of Art, and he’s on the board at Johns Hopkins Medicine. That’s just a sampling.
And this summer, he’ll become the newest member of the Harvard Corporation, the University’s most powerful governing body.
Everyone seems to know Rubenstein. At a panel on higher education in April at the Economic Club of Washington, D.C.—which he also leads as its president—Rubenstein was in his element. Taking the podium in the Marriott Hotel ballroom he had filled with a crowd of ambassadors, lawyers, bankers, and higher education leaders, Rubenstein—whose thick-framed black glasses pop out against a shock of white hair—pointed to familiar faces to thank them by name.
After a lunch of salmon and salad dressed in truffle vinaigrette, University President Drew G. Faust and the presidents of Stanford and Ohio State joined him on the stage for an hour-long discussion on the future of higher education.
While the topic is far from light-hearted, Rubenstein managed to slip in a dose of his trademark humor.
“Do members of Congress ever say, ‘here’s my son’s resume?’” Rubenstein asked Faust.
“I don’t think any member of Congress has ever done that, but I have had people come up to me when I’m taking a walk and lobby on behalf of their grandkids,” Faust said with a laugh.
In the coming months, Rubenstein will have plenty more opportunities to trade quips with Faust about all things Harvard. As one of the 13 members of the Corporation, Rubenstein—who did not attend Harvard at all, but has donated tens of millions to the University—will be a regular at Loeb House, where the body conducts its meetings. He’ll join a cadre of lawyers, academics, and corporate leaders each distinguished in their professional careers.
But none of the other members will quite have Rubenstein’s star power. A recent Forbes magazine cover proclaimed him one of the “Kings of Capital,” a “60 Minutes” segment referred to him as “Clark Kent in a suit and tie,” and the New Yorker magazine described his role as a “civic patriarch.” He hosts the “David Rubenstein Show” on Bloomberg Television, conducting “peer to peer conversations” with Oprah Winfrey, General David Petraeus, and Jamie Dimon, the CEO of JP Morgan.
Rubenstein is “a recognizable figure in most circles across the United States now,” his long-time business partner Daniel A. D’Aniello said in an interview.
In short, Rubenstein is a far cry from the Boston brahmins of the Corporation’s past.
Once a tight-lipped, seven-member body of New England alumni, the Corporation has slowly broadened its membership and relaxed tradition. And Rubenstein, who reportedly uses his private Gulfstream G550 jet 250 days out of the year, is emblematic of Harvard’s efforts to modernize the Western Hemisphere’s oldest corporation.
'The Wizard of Oz Behind the Curtain'
From the chandeliered rooms of Loeb House to the shores of Cape Cod, the site of the Corporation’s annual summer retreat, members chart the University’s course—as they have for over three and a half centuries.
Removed from day to day campus life, the historically secretive body holds Harvard’s purse strings and has the final say on every major change at the University. Appointing deans, changing school seals, and passing sweeping policies governing undergraduate social life require the Corporation’s stamp of approval. And perhaps most importantly, the body wields the authority to appoint or remove the University president—a power it exercised when it ousted former University President Lawrence H. Summers in 2006.
“We are responsible overall for the health and welfare of the University in the broadest fiduciary sense,” outgoing Corporation member and former Duke University president Nannerl O. Keohane said in an interview.
The Corporation’s 1650 charter, enshrined in the Massachusetts Constitution, established a governing body with seven seats to be filled by five members, a treasurer, and the president. Members served life terms with the approval of the Board of Overseers—Harvard’s larger, less influential governing body composed entirely of alumni.
While Harvard grew in size and prominence over the ensuing 350 years, the Corporation remained much the same. But after the turn of the millennium, its size had become stifling and its secrecy, oft-criticized.
“It was very hard to feel that a seven-person board, even with the support and help of the Board of Overseers, could have financial and fiduciary responsibilities for such a large and complicated institution,” Keohane said.
The Corporation’s opacity drew the ire of School of Engineering and Applied Sciences professor Frederick H. Abernathy and former Dean of the College Harry R. Lewis ’68. In 2009, on the heels of the financial crisis, the two penned an op-ed in the Boston Globe excoriating the body for its lack of accountability and transparency. With such a small group of people making high-stakes financial decisions, Lewis and Abernathy called the body “a dangerous anachronism.”
“One of the issues at the time of the governance reforms was that the Corporation was a mystery,” Corporation Senior Fellow William F. Lee ’72 said in an April interview. “It was like the Wizard of Oz behind the curtain, except you didn’t know whether the Wizard was speaking or not.”
To pull back that curtain, the Corporation spent its annual beach retreat in 2010 brainstorming how to revamp the aging body. The reforms the group eventually announced that December resulted in a dramatic restructuring of the Corporation. They nearly doubled its membership from seven to 13 members, instituted term limits, and created committees within the Corporation that focused on different aspects of University life. The more formal approach, according to Lee, allows members to better promote the Corporation’s four primary responsibilities: “intellectual capital,” “reputational capital,” “physical capital,” and “financial capital.”
Now, members of the Corporation interact more regularly with Overseers on several joint committees. But they won’t be there for as long; in the past, Corporation members—mostly men of the Boston upper-crust—sat on the board for decades, until they reached some “vaguely determined age,” Keohane said.
But the reforms capped members’ tenure at two six-year terms, so Keohane—who was elected to the Corporation in 2005—is on her way out.
“Now that we have term limits there will more often be the need to think about a new member,” Keohane said. “It has simply given us a chance to think more carefully about the types of expertise that we bring on.”
The Corporation’s expansion meant bringing in a new cast of characters. The body added new members in increments over the following years—inducting former Tufts University President Lawrence S. Bacow, University of California, Berkeley computer scientist Susan L. Graham ’64, and Boston businessman Joseph J. O’Donnell ’67 in 2011. In 2012, Harvard added investment banker Paul J. Finnegan ’75, foreign policy expert Jessica T. Mathews ’67, and lawyer Theodore V. Wells, Jr., and rounded out the 13 with venture capitalist James W. Breyer in 2013.
But even with 13 members, the Corporation is among the smallest university governing boards in the country—meaning each individual member holds significant sway. Even though Faust, who Lee likened to “the CEO,” sets the Corporation’s agenda, the 12 other members decide the fate of the University by majority vote.
When Keohane steps down in July, one of those votes will belong to Rubenstein.
'Access Capitalism'
Rubenstein’s childhood friends didn’t expect the son of a Baltimore postal service worker to end up on the cover of Forbes magazine.
After graduating from Duke and the University of Chicago Law School, Rubenstein spent two years working in corporate law before entering the world of politics. He became a policy aide to Jimmy Carter’s 1976 presidential campaign and—when Carter won—a deputy to domestic policy adviser Stuart Eizenstat in the White House.
“I thought when we were in high school that his career was going to be focused mostly on government and politics,” childhood friend and former Baltimore mayor Kurt L. Schmoke said in an interview. “Those of us who knew him way back then...we all thought that we would be talking about cabinet secretary Rubenstein rather than CEO Rubenstein.”
But when Carter lost to Ronald Reagan in 1980, Rubenstein left government for the corporate world. He had a vision for a new type of enterprise. Carlyle Group chairman and co-founder D’Aniello remembers his auspicious first meeting with Rubenstein at the restaurant of a Washington, D.C. Marriott in 1986, when the partnership that would lead to Carlyle’s founding began to take root.
D’Aniello recalls thinking Rubenstein was “very polite, very reserved, but well-spoken.” At the time, Rubenstein was working at a Washington law firm and D’Aniello was the vice president of corporate financial planning for Marriott.
After convincing D’Aniello to join him and telecommunications executive William E. Conway, the trio began courting investors to seed what became the Carlyle Group, which was named after the storied hotel. “We started out with only 5 million dollars of capital and the rest is history, really,” D’Aniello said.
The pitch was to leverage Rubenstein’s Washington connections and D’Aniello and Conway’s financial acumen to corral a new set of insider investors. Soon, Rubenstein had recruited a roster of ex-Washington power players, including former Secretary of Defense Frank Carlucci and former Secretary of State James Baker, to the firm.
Michael Lewis, writing for the New Republic in 1993, spared no criticism of the firm’s tactics. To him, Carlyle privileged high-profile names on its staff list over substantive financial planning, in what he called “access capitalism.”
“I've leaned over backward so far to avoid using government contacts,” Rubenstein told Lewis in 1993. “I didn't want anyone to be able to write an article saying we were trading on our connections.”
While private equity has been widely criticized for its emphasis on stock value, Rubenstein said he “likes to analogize [private equity] to sex.”
“You realize there were certain things you shouldn’t do, but the urge is there, and you can’t resist,” he told to a crowd gathered at the Business School in 2009.
But Rubenstein’s instincts pay off, D’Aniello said, describing Rubenstein as a calculated risk-taker—a “type-A personality” with an “unrelenting will to succeed.”
“David, first of all, is a visionary,” D’Aniello said. “He thinks about the world in the way it will look in five to ten years rather than where it is now. And to a large degree he has been sort of the guiding light of the strategic plan and execution of Carlyle's growth over the last thirty years.”
Now, the Carlyle Group’s more than 1,550 employees span six continents, managing a total of $162 billion in assets.
As the Carlyle Group spread around the world, Rubenstein’s wealth and reputation grew with it.
Over the past three decades, Rubenstein has met investors, heads of state, corporate CEOs, and public officials across the globe, oftentimes publicly bantering in the same way he did with Faust.
'Patriotic Philanthropy'
Through his philanthropy, Rubenstein has ensured that his name is, indeed, everywhere.
When an earthquake damaged the Washington Monument, he quickly put up $7.5 million to fund its repair. He paid to renovate the slave quarters at Monticello and support the National Zoo’s pandas. When a copy of the Magna Carta went up for auction, Rubenstein quickly bid on it—and donated it to the National Archives, where it is on display in the “David M. Rubenstein Gallery.” And, after a $10 million gift, the main exhibition hall of the Smithsonian’s recently-opened National Museum of African American History and Culture bears Rubenstein’s moniker.
“He’s more or less invented this notion of patriotic philanthropy,” former Kennedy School Dean David T. Ellwood said of Rubenstein.
So when the president of the country’s oldest university, then Lawrence H. Summers, approached Rubenstein at the World Economic Forum’s annual meeting in Davos, Switzerland about a decade ago, Rubenstein lent a ready ear. Summers wanted to know if he was interested in getting involved with Harvard and the Kennedy School in particular.
Rubenstein was no stranger to Harvard: his wife, Alice Rogoff, graduated from the Business School in 1978, and two of their daughters would go on to attend the College. Though Rubenstein didn’t have a personal connection to the Kennedy School, it brought his interest in higher education and “patriotic philanthropy” together.
“I think one of my interests in supporting things at Harvard is to help not only Harvard but also help other universities, because I think our higher education system is our great national treasure, and if our great national treasure can be enhanced by people giving their time and energy and ideas, then hopefully it’s a good thing for our country,” Rubenstein said in an interview.
Summers continued to court Rubenstein after their initial meeting in Davos, and Rubenstein even hosted Summers for a party at his Nantucket home. Summers, a former Secretary of the Treasury, remembers playing “aggressive tennis” with the billionaire.
“We played tennis, and David was as aggressive about his tennis as he was about everything else, though fortunately, his investing ability is bigger than his tennis ability,” Summers recalled. Rubenstein donated $10 million to the Kennedy School in 2004 and agreed to chair the school’s capital campaign, on one condition: the school’s buildings had to go.
“I went to him and said we’d like you to lead our campaign. He agreed to do it, but he said ‘David, your buildings are a big problem. If we’re going to work on this, we need to do it,’” Ellwood recalled.
The $10 million gift was the beginning of a philanthropic relationship with Harvard that has lasted for over a decade. Ellwood said he attributes a large amount of his success as the Dean of the Kennedy School to Rubenstein, and Summers regularly sought Rubenstein’s advice throughout his presidency.
After Faust took over from Summers, Rubenstein’s involvement with Harvard deepened. He donated $5 million to the Business School in 2011, and took the stage at the 2o13 launch of the University’s record-setting capital campaign. He is one of the campaign’s co-chairs, and he and his wife have donated at least $25 million to the campaign to date.
Rubenstein makes frequent trips to Cambridge: he estimates that he visits Harvard about once every six weeks. And well before he was elected to the Corporation, he was acquainted for one reason or another with the bulk of its members. He’d met Shirley M. Tilghman, the former president of Princeton, Keohane from his time on the board of Duke University, Matthews from working together in the Carter White House, and former Corporation member Robert E. Rubin ’60 from serving as vice chairman of the Council of Foreign Relations.
Rubenstein was on the Corporation’s radar.
The Making of a Corporation Member
Whether or not the Corporation was on Rubenstein’s radar, though, is another matter. The Corporation regularly sends out feelers to get a sense of who might be next to join the board.
“I actually think that if you try to become a Corporation member, that probably will ensure that you won’t become one,” Lee said. “As I’ve said publicly, it’s a group of folks that no matter what their accomplishments, everyone checks their ego at the door, and that’s a hard mix to maintain, but it’s critical to giving the best advice to the president as possible.”
After the reforms, the Corporation created a new governance committee tasked with nominating prospective members to the Board. The committee casts a wide net when looking for candidates, drawing names from across the University.
Nominees in mind, the Corporation’s governance board takes stock of what buckets of expertise it needs on its body. With a larger membership, Lee and Faust both said the Corporation tries to assemble different skill sets and professional backgrounds. Indeed, recently, the Corporation’s membership has seemingly conformed to a preset configuration.
“If you look at the list of the people on the Corporation today, and you look at their backgrounds, you’ll see it,” Lee said. “We have four current and past college presidents, we have four major business executives. We have a couple of lawyers—Ted Wells and me, we’re not sure why we’re there. We have someone from the nonprofit world—Jessica Matthews—we have some other academics, so you’ll get a sense for how the puzzle fits together.”
The death of James R. Rothenberg ’68 in July 2015 was an abrupt and tragic loss to many Corporation members. It also left a hole in the Corporation’s knowledge base that the body was not prepared to immediately fill.
With Keohane’s term coming to a close, Lee said that the Corporation had been prepared to replace her with Tilghman, and maintain the number of prominent academics on the board. Tilghman—a renowned life scientist—chaired the University’s life sciences review in her first year on the Corporation. But with Rothenberg’s untimely death, the group was short on financial savvy.
“Jim participated, he knew what was going on, and he could advise us,” Lee said, adding that Tilghman’s time at Princeton made her a compelling candidate. “When we filled that spot with Shirley, that left the huge hole that Jim left, and having folks who have business expertise, who participated at the highest level both as investors and business folks is important to us.”
Rubenstein was a natural fit. His decades of experience in private equity, millions of dollars donated to the University, and laundry list of boards he sits on were more than enough qualification.
“I probably served on as many nonprofit boards as one can serve on,” Rubenstein said.
That Rubenstein never attended Harvard distinguished him from many of his would-be colleagues on the Corporation. Only Keohane and Faust did not attend any of Harvard’s schools before assuming a governing role. Keohane and Rubenstein say that’s an asset.
“We think as long as we can now get 13 people, it may make sense to have a few of us without Harvard ties, so that we bring the perspective of some other educational experiences,” Keohane said.
“I think if you’re as important to the country as Harvard is you probably need to take a look at whether you should only have Harvard graduates doing certain things,” Rubenstein said.
By the time Faust called Rubenstein to formally invite him to join the Corporation, he had already been thoroughly vetted by the sitting members and the Overseers. Rubenstein told Faust he’d have to think about it.
“I went back and forth and decided to make sure that the time constraints would work because I think if you’re going to be a member of a nonprofit board—particularly a small one as this one is—you need to show up at the meetings,” Rubenstein said. “I had to make sure my schedule would work.”
'Einstein's Definition of Insanity'
Soon after Lee became the senior fellow of the Corporation in 2013, he solicited advice from the chairs of other prominent nonprofit boards. He eventually found himself across the table from Rubenstein, whose deep knowledge of higher education institutions made him an appealing lunch partner. Laurene Sterling, who serves with Rubenstein on Duke’s board of trustees, said his leadership on the board “has just been transformational.”
Lee and Rubenstein chatted amicably over lunch, but Lee said Rubenstein was candid in his assessment of what he should prioritize as senior fellow.
“He was direct, he was honest, he gave me his views of what was strong at Harvard, what wasn’t strong at Harvard,” Lee said.“The only awkward moment is when I offered to pay the luncheon bill and he said, ‘You don’t have to because I own the restaurant.’”
Rubenstein will bring more to the Corporation than a generosity for lunch bills and honest counsel. His time at Carlyle has not only served to enrich him personally—he’s also developed a robust fundraising network.
At Carlyle, Rubenstein finds investors to fund the firm’s ventures. As the private equity firm seeks to buy controlling stakes in private companies—with the intention of selling those interests after making the company more profitable—it needs to put up the equity. It’s Rubenstein's job to raise the funds to make those purchases. He’s quite good at it.
"David is the most prolific fundraiser maybe the planet has ever seen in any field, not just private equity—and Bill Conway is one of the greatest investors I have ever met," Jimmy Lee, the JPMorgan Chase banker, told Forbes magazine in 2012.
Over the course of Rubenstein’s career, his web of contacts has only continued to grow.
“He has a huge reach across not only the business community but also the government community as well as the philanthropic community,” D’Aniello said. “And all of that is a function of his growth and experience in fundraising and the financing of the firm over the course of the last thirty years.”
As a Corporation member and chair of the capital campaign, Rubenstein plays an active role helping the University raise money. His status as a prominent donor gives him credibility as he asks others to make major gifts.
“I mean I can go out and ask somebody to give $20 million—I did it as president,” Keohane, who served as president of Duke for 11 years and Wellesley for 12 years, said. “But now, as a sitting member of the Corporation, I couldn’t give anywhere near that, and therefore, according to the canons of fundraising, it is not going to be very persuasive for me to go ask somebody to give $20 million.”
“They’ll say, ‘What did you give?’ It’s nowhere in that ballpark,” she added.
Rubenstein has extensive experience convincing his wealthy peers to donate to universities and non-profits.
“I chaired a number of capital campaigns for nonprofits, and I think at one point I was chairing or co-chairing six nonprofit capital campaigns simultaneously, which is surely Einstein’s definition of insanity to the nth degree,” he said.
Corporation members hope that Rubenstein’s knack for investing transfers over to Harvard Management Company, which has seen “challenging” returns during the last decade.
“Specifically, David Rubenstein has been brought on in part to help us deal with the need for strength in the area of investment and development,” Keohane said.
And though 20 percent of the endowment’s investments are in private equity, Rubenstein and others said that he won’t be in a position to make direct investment decisions that might benefit Carlyle. While the Corporation appoints members to HMC’s Board of Directors, they do not directly set investment strategy at the firm.
Rubenstein said he “wouldn’t presume” that he’ll be providing advice to HMC’s CEO during his tenure on the Corporation.
“I’m obviously happy to give advice if asked, but I think they’re in pretty good shape, they don’t need my advice,” Rubenstein said. “There’s clearly been some challenges for all university endowments in the current situation but Harvard’s now dealing with it directly, and it’s obviously more challenging managing an endowment as large as Harvard’s and as visible as Harvard’s.”
D’Aniello said he expects Rubenstein to recuse himself from any governance decisions involving private equity. D’Aniello previously served on the board of trustees for Syracuse and said he would leave the boardroom if his nonprofit responsibilities and his responsibilities to the Carlyle Group collided.
“Every time they made a decision with respect to putting money with private equity, I would recuse myself,” D’Aniello said. “And as a matter of fact, I’m happy to say that they never did invest anything at Carlyle. But he’s not going to be involved in those decisions, he’ll be recused from those decisions.”
Frequent Flyer Governance
In recent years, Harvard has been trying to expand its global reach. More than 9,800 of its students and scholars are international, Faust just finished a global tour to promote the capital campaign, and Harvard recently opened a center in Tunisia.
Keohane said the Corporation is trying to reflect that international focus.
“When I joined the board, there was almost a sense that Harvard was Harvard, and you know we have a few peers, but most of our time is spent thinking specifically about Harvard itself,” she said. “And now, we’re more inclined to think about Harvard within a context of how higher education is developing around the world.”
Rubenstein is used to thinking globally. He has traveled to the Middle East with Ellwood and spoken at Harvard events in London. “He’s constantly all across the planet,” Ellwood said. And Faust described Rubenstein as the “force behind the creation of the Global Advisory Council”—a network of prominent alumni who advise Faust about international engagements.
“He has so many connections around the world that he’s been very helpful in bringing people together for that group,” Faust said.
As Rubenstein eyes the first few months of his tenure on the Corporation, his focus will be on learning about Harvard. He’s well-versed in the process.
“I think it’s good for new board members to kind of not assume that they’re going to have much influence for a while because I’ve got to learn a lot and listen, so I obviously spend a lot of time listening and learning for the first part of the time that I’m on the boards,” he said.
But as he takes his seat on the governing body of a University better known for its buttoned-up members dedicated to a sober purpose than jetsetting billionaires with their own television shows, Rubenstein is ready to lighten up the mood.
“Hopefully I can...bring some sense of humor to the whole thing so you can have a perspective that's not completely 100 percent so serious,” he said.
—Staff writer Brandon J. Dixon can be reached at brandon.dixon@thecrimson.com. Follow him on Twitter @BrandonJoDixon.
This article has been revised to reflect the following correction:
CORRECTION: May 23, 2017
A previous version of this article incorrectly indicated that the Carlyle Group purchases controlling stakes in publicly-traded companies. In fact, the private equity firm purchases stakes in private companies.