Mitt Romney is a quantum CEO, the Schrödinger’s Cat of private equity: From 1999 to 2002, he both was and was not the chief executive officer and sole owner of a powerful Bain Capital investment fund. After that period, Romney’s surrogates explain, he “retroactively” retired from this post. But, as Schrödinger’s famous thought experiment reminds us, just because you find a retroactively dead cat doesn’t mean he wasn’t previously simultaneously alive and dead.
While the two presidential campaigns tussle over this paradox, the real shame is how willing Romney and his defenders are to tolerate this bending of the truth, heretofore confined to particle physics. It’s another insight into the increasingly murky culture of American capitalism.
While Romney has claimed at times he was retired from Bain Capital during the period, he also signed documents filed with the Securities and Exchange Commission attesting that he was the “sole stockholder, sole director, Chief Executive Officer, Managing Director and President” of a multimillion-dollar investment fund.
Romney signed the filings because of a law passed by Congress in 1968 that tried to make financial markets more transparent. At the time, early corporate raiders – the progenitors of Romney and his colleagues at Bain – had been buying up stock in secret to seize control of public companies. They hoped to replace management and improve them enough to turn a profit. Like the similar efforts of Romney and other buyout specialists, some of the companies were run straight into bankruptcy, though rarely at a loss for the raiders.
The law attempted to balance the investors’ right to know who else owns a company with the economic benefit that comes from activist shareholders who prod management to become more effective. Thus, it required investors who own more than 5 percent of a given company to register publicly, explaining who they are and why they’re purchasing a large share of the publicly traded company.