Law And More

Apollo Global Management - In Vision, Still the Gunslinger We Love

For Q2 2021 Apollo Global Management crushed it. 

As The Wall Street Journal reports, its private-equity portfolio increased faster than what had been happening in the broader market. In net income, it catapulted to $657.7 million, from $446.3 million a year earlier. The dividend is up too - 50-cents versus 49-cents in a comparable period last year. Meanwhile the assets under management increased to $471.8 billion from $413.6 billion in Q2 2020.

But the bigger news is the vision for the business. That's being engineered by the new Chief Executive Officer Marc Rowan.

Some of it is already playing out. For example, Rowan has been implementing its insurance strategy. Apollo had purchased the 65% of Athene that it hadn't owned. That, in turn, predicts Rowan, will be the platform for doubling its credit business in the next five years. 

Law firm Paul Weiss, chaired by Brad Karp, handled that $11 billion transaction. Here are the details provided by Paul Weiss:

"Apollo (NYSE: APO) and Athene (NYSE: ATH) have entered into a definitive agreement to merge in an all-stock transaction that implies a total equity value of approximately $11 billion for Athene. Under the terms of the transaction, each outstanding Class A common share of Athene will be exchanged for a fixed ratio of 1.149 shares of Apollo common stock. Upon closing of the merger, current Apollo shareholders will own approximately 76% of the combined company on a fully diluted basis, and Athene shareholders will own approximately 24%."

Rowan also envisions the firm's other two niches private equity and real assets will increase by 50% during that same five-year timeframe.

This enhanced focus of insurance is what is being watched.  As The Wall Street Journal puts it:

"The shift reflects Apollo’s evolution from a leveraged-buyout shop to a credit-investing powerhouse catering primarily to insurance companies looking to park reams of cash from selling retirement-savings products known as fixed annuities." 

The gawking is about if Rowan can pull it off and how lucrative this will turn out to be. 

The gunslinger behavior of Apollo's past has ended. Its outsized previous head Leon Black has stepped down. But Rowan's strategy retains that ethos of aggressive building. Currently that's on the foundation of insurance. 

Often Wall Street takes it on the chin because it is made up of, yes, gunslingers. Watchdogs suspect wrongdoing. The intensity, risk-taking, frantic pace of innovation, and the big money involved scare many. Also, the wealth acquired by those in the industry is cause for resentment. 

But most of the Wall Street gunslingers have proved out they shake off all that, take on what is the protective coloring of the new age, and adapt their products and services. Just look how they accommodated ESG investing - and essentially on their own terms and conditions. Apollo has situated itself quite nicely for the Biden Administration regulatory environment. 

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Activision Blizzard, ESG, and the Old-line Bottom Line - Lessons for All Businesses and Their Law Firms

"Less clear .. is how the scandal of the recent lawsuit could impact the company’s [Activision Blizzard's] actual business. The complaint filed July 20 accuses the company of running a hostile working environment for women, with allegations of unequal pay and promotion practices listed alongside disturbing instances of harassment ..." - Dan Gallagher, The Wall Street Journal, August 4, 2021.

Activision Blizzard could be the canary in the mine about how much do ESG (Environmental, Social, Goverance) issues really impact the business of a business. That is, the traditional bottom line of revenue and profit. Will an annual report with disappointing financial results defend those with, "It was our ESG, bro." 

As many know, that ESG value system extends globally. The Chinese ruling party has pivoted to social concerns. The WSJ reported earlier, currently those are focused primarily on what factors could be harming children. Videogames could wind up being banned - a horrific development for Activision Blizzard.  

Research has proven out a positive correlation between ESG performance and the financial kind. Also, a negative one.

One study has been by the Smith School of Enterprise and the Environment at the University of Oxford and Arabesque Asset Management. It found that in 88% of businesses' sustainability practices showed a relationship to improved operations. In itself that improved cash flow. That shouldn't have been a surprise. When corporations review proceses there are usually improvements in efficiency. ESG is only one of the many lenses through which to conduct such an "inspection."

Another study by Deutsche Bank’s Asset and Wealth Management division with the University of Hamburg discovered this: ESG contributed 62.5% to the positive results in financial performance. But it also found negative results in 10% of the businesses. That is an important red flag that can't be ignored. 

The challenge, of course, is the need for more data. Lots of it. Measuring ESG in itself has been difficult. Part of that is because there must be developed and agreed on standard ways to research the correlation or even the direct cause-and-effect between a company's ESG strategy/implementation and the bottom line. 

Meanwhile, as The American Lawyer reports:

"Big Law firms are opening up environmental, social and governance practices, driven by priorties of the Biden administration and, increasingly, those of consumers and institutional investors."

In February 2021, Gibson Dunn and Seyfarth Shaw jumped in with their practices.

However, there could be an early-adopter advantage in this growth niche for law firms. Way back in April 2020, Paul Weiss, chaired by Brad Karp, launched its full-service ESG practice. Its branding is reinforced by Karp's high-profile social-justice activism. 

To give you some idea how ESG practices in law firms are being configured, here you can see how Paul Weiss structured its:

"Business leaders face greater pressure to increase their organizations’ resilience while simultaneously addressing social issues of importance to stakeholders. Our advisory practice helps companies navigate the legal, business and political ramifications of developing and implementing ESG initiatives. We advise on matters such as stakeholder engagement, corporate governance, crisis management, corporate social responsibility, sustainability, diversity and inclusion, ethics and compliance."

With ESG global, the complexities keep evolving, both for corporations and their law firms. Even more problematic, those factors tend to intersect. Shifting social values in China about influences on children are happening at the same time as shifting values in the U.S. about alleged toxic workplaces.

Activision Blizzard could be in for the kind of crisis other corporations and their law firms will analyze and try to learn from. 

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The Law Firm in 2021: Jabs, Branding, and Being "Double-Humped"

The politics and the theatre of the vaccination issue have pivoted into a branding one.

For example, early adopters in announcing mandatory jabs have been positioned and packaged as heroes. Those range from chairpersons David Sanford at Sanford Heisler to Brad Karp at Paul Weiss. In a sense they have been "Profiles in Courage," as John F. Kennedy understood that term.

No surprise, the entire law-firm niche currently gets it how important in reputation management is the jab policy - along with the decisions about the return-to-the-office and when.

Chairperson at Akin Gump Kim Koopersmith receives lots of space in Bloomberg Law in the announcement: no access to the office until two weeks after being fully vaccinated. Also, circling back to the office has been rescheduled from September 13th to October 11th. That might be wishful thinking. 

Obviously, the legal sector is getting it that, just as with the Influenza pandemic, the world is going through a second round of COVID. That, just like how influenza circled back in 1918, could be more virulent than the first hit. Back in the early 20th century, chronicles Lawrence Wright in "The Plague Year: America in the Time of COVID," the phenomenon was called being "double-humped."

A double-humped law-firm industry could ride this out smoothly (despite all the announcements and backtracking) if it doesn't panic. Remote had been proved out. Evidence of that had been the windfall profits of 2020.

The rub, of course, could be possible pressure from clients such as Morgan Stanley by way of Chief Legal Office Eric Grossman. They could be impatient to have all lawyers on the account back in a formal office setting, very soon.  

A premature return to the office could involve tremendous risk. Even with the abundance of caution, COVID could spread through an office. The jabs don't guarantee much. As played out in Provincetown, MA, some of the fully vaccinated did contract the Delta variant. The most optimistic take on going through the ordeal of the jabs is that if contracting Delta, the experience probably won't be life-threatening. 

The outbreak of COVID in a law firm could derail that brilliantly engineered assembly line to get the nuts and bolts tasks done which implement partner strategy. Associates could wind up beig stuck at home, too sick to even do work remotely. Also, it's a brand issue. The law-firm leadership would be vilified for "allowing" the plague to take over the lives of the workforce.

Of course, there are no right answers.

In "The Plague Year," Wright notes:

"In 1918, Americans were facing the same confounding choices they would a century later."

With the brand in play, law-firm chairpersons are in a pickle they probably never anticipated. On this one, they have to think beyond business to old-fashioned ethics. In a sense, this is the ESG moment for the ethos of the legal sector. Forced could be a massive rethinking of culture. 

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Can't Get into T-14 Law School? - Then, Maybe You Should Investigate Another Career Path

"Federal data suggest the value of a law degree from nonelite schools has diminished. Salaries haven’t kept pace with inflation over the past 20 years. Meanwhile, tuitions have soared. A three-year juris doctor program, including living expenses, now can cost more than $250,000 at private law schools." - The Wall Street Journal, August 3, 2021.

In essence, to loop into the big money in pursuing a career in the legal sector, it's usually necessary to matriculate at a T-14 law school.

Otherwise, you could be locked into the reality that your earning capacity will barely be adequate to pay off all those student loans. According to the NALP, the median base salary for the JD Class of 2019 had been $72,500. Yet, according to NerdWallet, the average student loan debt (including undergraduate loans) is $145,500.

The tone and content of the WSJ anaysis represent a vilification of non-elite law schools. The message is that they allow a kind of what one law professor labels a "cruel optimism" about graduates' ability to earn enough to pay off student debt comfortably. 

But, the money is not the only part of that bad deal. There are also matters of dashed hopes, three years of one's life invested, and the opportunity cost of not working at a well-paying job or preparing for another career path. 

With only an undergraduate degree, for example, the ambitious can compete for an entry-level position at Goldman Sachs. Basic salary is now $110,000. 

Of course, the debt pickle many law school graduates are in is the tip of the iceberg, to use that cliche, in what's become standard in higher education.

Earlier, the WSJ published an expose of the growing number of graduates of advanced degree programs at elite universities who were earning peanuts. It is difficult to pay even the mininum of the monthly repayment nut and they will be saddled with that debt burden for life. Those degrees usually are in glam fields such as film and media. The odds of hitting it big enough to shake off the investment in the degree aren't good. 

The takeaway: Higher education is BigBusiness. Consumer beware. 

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Portfolio for Jane Genova - 2021

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Deutsche Bank's DWS Group - Sign of Escalating Questions/Confusion about ESG Investments

"Deutsche Bank AG’s DB -3.02% asset management arm, DWS Group, DWS -0.30% tells investors that environmental, social and governance concerns are at the heart of everything it does, and that its ESG standards are above the industry average. But behind closed doors, it has struggled to define and implement an ESG strategy, at times painting a rosier-than-reality picture to investors ..." - The Wall Street Journal, August 1, 2021.

The former executive who presented that struggle to the executive board had been the head of sustainability - Desiree Fixler. She had been fired. That termination was done very soon before the annual report was released. The formal report provided a positive take on the DWS Group's ESG Investments. Was there a cause-effect factor or a correlation between the candid disclosure and the termination? That may never be known.

But what is known is that there are growing questions and escalating confusion about ESG investments. According to MorningStar data, every day $3 billion flow into that niche.

Those questions and that confusion should be no surprise.

There's no clear definition what constitutes this particular kind of investment. That is, one which does double-duty: delivers a return to shareholders and does good for society.

It's a little bit of a stretch to say that an ESG investment can be whatever you call an ESG investment. But not that much of one.

On the Bloomberg Law podcast "Parts Per Billion," David Schultz explains how loosey-goosey this investment niche is. It represents an essentially unregulated area. Yet trillions are in these investments globally. 

That could start to tighten up. In the Biden Administration there is an overall focus on more disclosure for investing in general and specifically for ESG funds. SEC proposals for this could begin to be released in October or November. Probably the first step would be to put in-place a standard for what could be classified as an ESG investment fund.

In addition, the CFA Institute is also pushing for guidelines as to what constitutes an investment labeled ESG. 

Meanwhile, as Schultz points out, this lack of regulation hurts every player in the game. A scandal about one investment could throw shade on all ESG investments. Think about it. There is an expose about one investment. Quickly, it could become obvious that no one knows what the hell an ESG investment is or isn't. The niche could be shaken to the core. Billions or even trillions could be lost.

Obviously, the corporations in which those ESG investments are made could also be caught up in any unraveling. Currently they wear halos. However, those halos could also become quite wobbly as more questions are asked.

Are they really green? As with Exxon, there could be radical action. Small hedge fund Engine No 1 pulled a board coup by persuading other investors that the corporation wasn't green enough. 

How they manage their global supply chain could be assessed as downright inhumane. An outcry could follow to dismantle parts of that chain.

They call that "diversity?"  Sure enough there can be a boycott until the business walks the line on that one. 

Riding to the rescue could be the ESG practices which major law firms have recently established. Those have anticipated the rethinking of what is the role of the public company today. In more simple times that was thought to be to provide a return to shareholders.

An early adopter of those ESG practices has been elite law firm Paul Weiss, chaired by social-justice activist Brad Karp. On its ESG website, Paul Weiss states:

"Interest on the part of investors and other corporate stakeholders in environmental, social and governance matters has surged in recent years, and the current economic, public health and social justice crises have only intensified this focus. We are committed to providing guidance on critical sustainability and ESG issues for companies and their in-house counsel."

More specifically, Paul Weiss puts its ESG mission this way:

"Business leaders face greater pressure to increase their organizations’ resilience while simultaneously addressing social issues of importance to stakeholders. Our advisory practice helps companies navigate the legal, business and political ramifications of developing and implementing ESG initiatives. We advise on matters such as stakeholder engagement, corporate governance, crisis management, corporate social responsibility, sustainability, diversity and inclusion, ethics and compliance."

The interesting thing about this particular law firm is that it is a Wall Street one. That could mean that its clients could experience a crisis in their ESG investment lines of business. This law firm as well as others serving the financial sector would be representing those clients on regulatory, legislative, and litigation issues associated with ESG investing per se. 

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Changing Face of New York Status - But Being Waked at Frank E. Campbell Funeral Home Remains a Purposeful Pursuit

Status isn't what it used to be.

For example, lots of media, ranging from Vanity Fair to the New York Post, have been hard on the competitive everything in the Hamptons. That ranges from old money being pushed around by new money to way too much hard-core socializing. Soon enough, that one-time high-profile playground for the rich and influential could become a symbol for decadence. Soon enough wealth could be setting up cheap plastic lawn chairs by the Hudson River. 

But one bit of status which will probably hold up is the ability to be waked at Frank E. Campbell funeral home. That's where the world paid its last respects to Jackie Kennedy Onassis. And so many other celebrities.

Located on Madison Avenue at 81st Street, its ethos is old-line. Almost WASP sense of frayed. That contributes to its elegance. 

However, the institution keeps up with the times. It offers cremation services. Yeah, those on the network say good-bye to you, then it's a simplified good-bye. No your having to go through that extra step of being lowered six feet into dirt. 

Readers: Can you think of other status touchpoints in New York which will stand up in the test of time and so much change? Please send your thoughts to janegenova374@gmail.com.

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Madonna Badger - She Is So Back (including from all the litigation)

On LinkedIn Updates, ad executive Madonna Badger posts:

"So proud and excited to be a part of the #AdAge Hot List today with our work for #Olay. #Olay has pushed us to empower women with all of the work we do together. This #TokyoOlympics Ad with Aly Raisman celebrates the #PowerofaDream. Thank you Olay, together we really can #faceanything."

Badger is the chief creative officer and founder of Badger and Winters. 

Lawyers might know Badger's name from the litigation generated by the 2011 fatal Christmas morning fire in her Stamford, Connecticut This Old House. Finally in 2018, it was announced that was all done. 

But the larger world knows Badger on an intimate emotional and spiritual level. In that fire she lost her three young daughters and mother and father. Later, her former husband Matthew Badger died of a heart attack at a relatively young age. 

After that tragedy, Badger left her professional life and went out west to heal. We who followed her painful journey weren't optimistic that she could restart her life and ever do the high-powered "Mad Men" kinds of work which had been her brandname. 

But, come back she did.

She married a long-term friend.

There is award-winning Badger and Winters.

And she has extended her brand to advocate for the desexualization of females in advertising. That is to honor her three daughters.

Obviously, Badger is a guiding light for how the rest of us can navigate our current challenges. For my tribe it's been aging. 

Thank you, Madonna Badger, for coming back. We needed that.

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From MyKayla Skinner to Johnny Carson - Lessons for Stuck Law Firm Chairpersons

Even before she won silver in gymnastics MyKayla Skinner had planned to retire from that niche. Like TV talk show host Johnny Carson she was going out before she had to. 

Carson's legacy remained golden. Skinner plans a fresh career path in journalism. 

There could be plenty of lessons from that for chairpersons of law firms. Some are old white men. Some are just stuck. And because they may have already peaked and essentially are just holding on, there have been unnecessary problems and missed opportunities. 

Take the haughty tone of their internal memoes which are leaked to media such as Abovethelaw.com.

That condescending approach to communications hasn't changed since Jeremy Blackman launched his blog in the early 21st century "Anonymous Lawyer" and published a novel by that title. His persona was that of a law firm partner.

One memorable post from "Anonymous Lawyer" was the announcement that between certain morning hours hot chocolate would be available in the law firm kitchen. The tone was as out-of-touch as what continues to be the usual in communications, both for outside counsel and for in-house. 

And what about a fall-off in firm financial performance? Thoughts immediately shift to David Boies at Boies Schiller. After a bad 2020, the firm has downsized its real estate footprint. Should the top layer of leadership there retire? Maybe they can pivot to positions in a legal institute or legal publishing corporatioins. 

Also, what about bad publicity? That could have been avoided for Paul Hastings not only recently but also back in 2008. The ham-handed way it handled the termination of associate Shinyung Oh got it a black eye in media such as The Wall Street Journal. That story hung on for years as journalists kept following up on what Oh had been doing. Recently I did just that - follow up. She is an Associate Marriage and Family Therapist. 

In addition, there is the ranking situation. Stuck in its black box and with its Trump Administration baggage, Jones Day dropped in elite status on the Vault 100 5 points. That's from 16 to 21. 

Meanwhile, in contrast to Jones Day, Paul Weiss is in the top 10, according to Vault. In 2007, before social-justice activist and innovator Brad Karp became chairperson, it wasn't up there. Incidentally, Karp is over-60 and white. But the concept of "old" doesn't get applied to his persona or his policies. 

Yes, business is hot in large law firms. But when it cools shareholders in law firms could pile on stuck leadership and force them out. This is an era of upheaval. It really doesn't take much to whip up momentum. Recall how the Little Engine That Could - Engine No. 1 - landed board seats at Exxon. 

Sure, the stuck could get unstuck. However, the ethos of the successful player in the legal sector is not to show weakness. Therefore, the usual dynamic in that kind of configuration is for the chairpersons under attack to dig in their heels even more. That means they can't pull off an organizational pivot. It might require a new generation of leadership to disrupt BigLaw.

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Howard Rubin - Harvard Business School Needs Elective "Not Crossing the Line"

Wall Street financier Howard Rubin could have had his career and married personal life intact. And simultaneously he could have enjoyed a S&M fetish sex hobby. 

But, that isn't how things recently have played out for Rubin.

Allegedly he crossed the line.

That might have been prevented if his alma mater Harvard Business School had offered, when he was studying for his M.B.A,. an elective on "Not Crossing the Line." 

As the New York Post chronicles in a long feature, Rubin has to show up in November for civil trial asking for $18 million. Allegedly, he had engaged in violent acts and sexual assault with six women.

They had been paid $5k for some S&M action in Rubin's fully equipped "dungeon" on Madison Avenue in Manhattan. However, they contend the experience included the unthinkable in brutality. Of course, the media presents examples of the alleged extreme S&M. His lawyer is Edward McDonald. 

Rubin has one of those oddball backgrounds which pans out in wild success. He had started out after college as a Vegas card counter and did well. Then he applied that casino mentality to the world of money management. He had worked at Salomon Brothers, then went on to being a big gun at the Soros Funds. 

His wife Mary Henry, also a Wall Street name, filed for divorce July 7, 2021. 

Posted on the Harvard Business School Wall of Shame are the names of alumni such as former McKinsey & Co head Rajat Gupta and former Enron leader Jeffrey Skilling. Both wound up guests of the state. According to the U.S. legal system, they crossed the line.

Reflection: Does a Harvard B School experience embed the message that those matriculating are the smartest kids in the universe. That could result in being too clever by far.

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