Schafer: Work in business shouldn't be a black mark

The 2014 U.S. Senate campaign in Minnesota opened in predictable ways, with partisans blasting investment banker-turned-Republican Senate candidate Mike McFadden as "just another rich guy who likes to fire people."

If you don't recognize that, it's leftover rhetoric from the 2012 presidential campaign. Regardless of whether it was fair criticism of Republican nominee Mitt Romney's tenure at private equity firm Bain Capital — and Romney did manage to get himself on TV saying something about liking to fire people — it doesn't fit McFadden.

McFadden is not a partner in a private equity firm like Bain that buys and sells companies. He hasn't collected millions of dollars at favorable tax rates, even as companies his firm controlled may have cut jobs.

McFadden's a merger-and-acquisition adviser to privately held companies. If that disqualifies him for office, then that pretty much rules out business professions as a path to public service. Bankers need not bother to run, or real estate brokers or advertising executives.

Not that investment banking is particularly noble work, but it's not that different from the client-service work so many Minnesotans do in business every day.

One other distinction may be useful here, too, for aren't investment bankers the guys who got rich by repackaging and trading of all those subprime mortgage securities until they needed a taxpayer bailout to keep their eight-figure compensation packages?

McFadden is not one of those guys either.

Of his work, McFadden said, "it's pretty simple. If you want to sell your house, you hire a Realtor. If you want to sell your business, you hire me."

What people like McFadden do is dig into a business to understand it, write an offering memorandum, or "book," that describes why it would be a good investment and then go about trying to find potential buyers. When it all works well, they can advise their client on the various merits of multiple bids, and then help negotiate the deal.

Although he does not intend to self-finance his campaign, to call McFadden "rich" is probably fair. An M&A firm that closes a $75 million sale will be paid a fee at closing of maybe $1.25 million to $1.5 million, with perhaps 40 percent of that going to the dealmakers. McFadden rose to the top of his firm.

But Larry Jacobs, who heads the Humphrey School's Center for the Study of Politics and Governance at the University of Minnesota, wishes good luck to any businessman's campaign trying to sell voters on the difference between a merger-and-acquisition adviser and private equity partner. The most appealing business candidate of any party in 2014, he said, is a buoyant entrepreneur with a track record of creating jobs.

McFadden has no up-from-the-garage entrepreneurial story, but he can talk about the Allen Edmonds Shoe Corp. of Port Washington, Wis., a premium shoemaker and retailer. McFadden had represented the owner of the business in a 2006 deal that saw the Minneapolis private equity firm of Goldner Hawn Johnson & Morrison take control and then invite him to join the board.

Allen Edmonds is now thriving, in recent years adding about 270 jobs. But it did shed 50 or so jobs during the financial crisis, and Lazard has a financial restructuring practice, too. While Lazard can't by contract with its client make operating decisions like eliminating jobs, companies in a financial hole that need Lazard to renegotiate debt or raise capital often cut payrolls, too. McFadden isn't going to be able to get around the fact that a business he's touched has cut jobs.

McFadden will have a simple explanation, that the work is about helping the company survive. The purpose of a layoff at a shoe company in a steep recession wasn't to enrich board members — who may not even be getting paid — but to stay in business and keep paying remaining employees and those at suppliers, too.

McFadden does plan to pitch his business background during the campaign. In a recent conversation he talked about politics as "the art of the possible, not of the pure" and about how he hopes to be measured by what he helps get done, not by what he said. Much like in his business career.

"I think I can help lead us to a better place," he said. "I know I can."

Far too soon to handicap whether he gets that opportunity. By the time the polls open next year, McFadden may have provided Minnesota voters plenty of reasons to vote against him.