Harvard Business School Case Study: Gender Equity

BOSTON — When the members of the Harvard Business School class of 2013 gathered in May to celebrate the end of their studies, there was little visible evidence of the experiment they had undergone for the last two years. As they stood amid the brick buildings named after businessmen from Morgan to Bloomberg, black-and-crimson caps and gowns united the 905 graduates into one genderless mass.

But during that week’s festivities, the Class Day speaker, a standout female student, alluded to “the frustrations of a group of people who feel ignored.” Others grumbled that another speechmaker, a former chief executive of a company in steep decline, was invited only because she was a woman. At a reception, a male student in tennis whites blurted out, as his friends laughed, that much of what had occurred at the school had “been a painful experience.”

He and his classmates had been unwitting guinea pigs in what would have once sounded like a far-fetched feminist fantasy: What if Harvard Business School gave itself a gender makeover, changing its curriculum, rules and social rituals to foster female success?

The country’s premier business training ground was trying to solve a seemingly intractable problem. Year after year, women who had arrived with the same test scores and grades as men fell behind. Attracting and retaining female professors was a losing battle; from 2006 to 2007, a third of the female junior faculty left.

Some students, like Sheryl Sandberg, class of ’95, the Facebook executive and author of “Lean In,” sailed through. Yet many Wall Street-hardened women confided that Harvard was worse than any trading floor, with first-year students divided into sections that took all their classes together and often developed the overheated dynamics of reality shows. Some male students, many with finance backgrounds, commandeered classroom discussions and hazed female students and younger faculty members, and openly ruminated on whom they would “kill, sleep with or marry” (in cruder terms). Alcohol-soaked social events could be worse.

“You weren’t supposed to talk about it in open company,” said Kathleen L. McGinn, a professor who supervised a student study that revealed the grade gap. “It was a dirty secret that wasn’t discussed.”

But in 2010, Drew Gilpin Faust, Harvard’s first female president, appointed a new dean who pledged to do far more than his predecessors to remake gender relations at the business school. He and his team tried to change how students spoke, studied and socialized. The administrators installed stenographers in the classroom to guard against biased grading, provided private coaching — for some, after every class — for untenured female professors, and even departed from the hallowed case-study method.

The dean’s ambitions extended far beyond campus, to what Dr. Faust called in an interview an “obligation to articulate values.” The school saw itself as the standard-bearer for American business. Turning around its record on women, the new administrators assured themselves, could have an untold impact at other business schools, at companies populated by Harvard alumni and in the Fortune 500, where only 21 chief executives are women. The institution would become a laboratory for studying how women speak in group settings, the links between romantic relationships and professional status, and the use of everyday measurement tools to reduce bias.

“We have to lead the way, and then lead the world in doing it,” said Frances Frei, her words suggesting the school’s sense of mission but also its self-regard. Ms. Frei, a popular professor turned administrator who had become a target of student ire, was known for the word “unapologetic,” as in: we are unapologetic about the changes we are making.

By graduation, the school had become a markedly better place for female students, according to interviews with more than 70 professors, administrators and students, who cited more women participating in class, record numbers of women winning academic awards and a much-improved environment, down to the male students drifting through the cafeteria wearing T-shirts celebrating the 50th anniversary of the admission of women. Women at the school finally felt like, “ ‘Hey, people like me are an equal part of this institution,’ ” said Rosabeth Moss Kanter, a longtime professor.

And yet even the deans pointed out that the experiment had brought unintended consequences and brand new issues. The grade gap had vaporized so fast that no one could quite say how it had happened. The interventions had prompted some students to revolt, wearing “Unapologetic” T-shirts to lacerate Ms. Frei for what they called intrusive social engineering. Twenty-seven-year-olds felt like they were “back in kindergarten or first grade,” said Sri Batchu, one of the graduating men.

Students were demanding more women on the faculty, a request the deans were struggling to fulfill. And they did not know what to do about developments like female students dressing as Playboy bunnies for parties and taking up the same sexual rating games as men. “At each turn, questions come up that we’ve never thought about before,” Nitin Nohria, the new dean, said in an interview.

The administrators had no sense of whether their lessons would last once their charges left campus. As faculty members pointed out, the more exquisitely gender-sensitive the school environment became, the less resemblance it bore to the real business world. “Are we trying to change the world 900 students at a time, or are we preparing students for the world in which they are about to go?” a female professor asked.

The Beginning

Nearly two years earlier, in the fall of 2011, Neda Navab sat in a class participation workshop, incredulous. The daughter of Iranian immigrants, Ms. Navab had been the president of her class at Columbia, advised chief executives as a McKinsey & Company consultant and trained women as entrepreneurs in Rwanda. Yet now that she had arrived at the business school at age 25, she was being taught how to raise her hand.

A second-year student, a former member of the military, stood in the front of the classroom issuing commands: Reach up assertively! No apologetic little half-waves! Ms. Navab exchanged amused glances with new friends. She had no idea that she was witnessing an assault on the school’s most urgent gender-related challenge.

Women at Harvard did fine on tests. But they lagged badly in class participation, a highly subjective measure that made up 50 percent of each final mark. Every year the same hierarchy emerged early on: investment bank and hedge fund veterans, often men, sliced through equations while others — including many women — sat frozen or spoke tentatively. The deans did not want to publicly dwell on the problem: that might make the women more self-conscious. But they lectured about respect and civility, expanded efforts like the hand-raising coaching and added stenographers in every class so professors would no longer rely on possibly biased memories of who had said what.

They rounded out the case-study method, in which professors cold-called students about a business’s predicament, with a new course called Field, which grouped students into problem-solving teams. (Gender was not the sole rationale for the course, but the deans thought the format would help.) New grading software tools let professors instantly check their calling and marking patterns by gender. One professor, Mikolaj Piskorski, summarized Mr. Nohria’s message later: “We’re going to solve it at the school level, but each of you is responsible to identify what you are doing that gets you to this point.”

Mr. Nohria, Ms. Frei and others involved in the project saw themselves as outsiders who had succeeded at the school and wanted to help others do the same. Ms. Frei, the chairwoman of the first-year curriculum, was the most vocal, with her mop of silver-brown hair and the drive of the college basketball player she had once been. “Someone says ‘no’ to me, and I just hear ‘not yet,’ ” she said.

After years of observation, administrators and professors agreed that one particular factor was torpedoing female class participation grades: women, especially single women, often felt they had to choose between academic and social success.

One night that fall, Ms. Navab, who had laughed off the hand-raising seminar, sat at an Ethiopian restaurant wondering if she had made a bad choice. Her marketing midterm exam was the next day, but she had been invited on a very business-school kind of date: a new online dating service that paired small groups of singles for drinks was testing its product. Did Ms. Navab want to come? “If I were in college, I would have said let’s do this after the midterm,” she said later.

But she wanted to meet someone soon, maybe at Harvard, which she and other students feared could be their “last chance among cream-of-the-crop-type people,” as she put it. Like other students, she had quickly discerned that her classmates tended to look at their social lives in market terms, implicitly ranking one another. And like others, she slipped into economic jargon to describe their status.

The men at the top of the heap worked in finance, drove luxury cars and advertised lavish weekend getaways on Instagram, many students observed in interviews. Some belonged to the so-called Section X, an on-again-off-again secret society of ultrawealthy, mostly male, mostly international students known for decadent parties and travel.

Women were more likely to be sized up on how they looked, Ms. Navab and others found. Many of them dressed as if Marc Jacobs were staging a photo shoot in a Technology and Operations Management class. Judging from comments from male friends about other women (“She’s kind of hot, but she’s so assertive”), Ms. Navab feared that seeming too ambitious could hurt what she half-jokingly called her “social cap,” referring to capitalization.

“I had no idea who, as a single woman, I was meant to be on campus,” she said later. Were her priorities “purely professional, were they academic, were they to start dating someone?”

As she scooped bread at the product-trial-slash-date at the Ethiopian restaurant, she realized that she had not caught the names of the men at the table. The group drank more and more. The next day she took the test hung over, her performance a “disaster,” she joked.

The deans did not know how to stop women from bartering away their academic promise in the dating marketplace, but they wanted to nudge the school in a more studious, less alcohol-drenched direction. “We cannot have it both ways,” said Youngme Moon, the dean of the M.B.A. program. “We cannot be a place that claims to be about leadership and then say we don’t care what goes on outside the classroom.”

But Harvard Business students were unusually powerful, the school’s products and also its customers, paying more than $50,000 in tuition per year. They were professionals, not undergraduates. One member of the class had played professional football; others had served in Afghanistan or had last names like Blankfein (Alexander, son of Lloyd, chief executive of Goldman Sachs). They had little knowledge of the institutional history; the deans talked less about the depressing record on women than vague concepts like “culture” and “community” and “inclusion.”

As the semester went on, many students felt increasingly baffled about the deans’ seeming desire to be involved in their lives. They resented the additional work of the Field courses, which many saw as superfluous or even a scheme to keep them too busy for partying. Students used to form their own study groups, but now the deans did it for them.

As Halloween approached, some students planned to wear costumes to class, but at the last minute Ms. Frei, who wanted to set a serious tone and head off the potential for sexy pirate costumes, sent a note out prohibiting it, provoking more eye rolls. “How much responsibility does H.B.S. have?” Laura Merritt, a co-president of the class, asked later. “Do we have school uniforms? Where do you stop?”

A few days before the end of the fall semester, Amanda Upton, an investment banking veteran, stood before most of her classmates, lecturing and quizzing them about finance. Every term just before finals, the Women’s Student Association organized a review session for each subject, led by a student who blitzed classmates through reams of material in an hour. Some of the first-years had not had a single female professor. Now Ms. Upton delivered a bravado performance, clearing up confusion about discounted cash flow and how to price bonds, tossing out Christmas candy as rewards.

Like many other women, Kate Lewis, the school newspaper editor, believed in the deans’ efforts. But she thought Ms. Upton’s turn did more to fortify the image of women than anything administrators had done. “It’s the most powerful message: this girl knows it better than all of you,” she said.

Breaking the Ice

One day in April 2012, the entire first-year class, including Brooke Boyarsky, a Texan known for cracking up her classmates with a mock PowerPoint presentation, reported to classrooms for a mandatory discussion about sexual harassment. As students soon learned, one woman had confided to faculty members that a male student she would not identify had groped her in an off-campus bar months before. Rather than dismissing the episode, the deans decided to exploit it: this was their chance to discuss the drinking scene and its consequences. “They could not have gone any more front-page than this,” Ms. Boyarsky said later.

Everyone in Ms. Boyarsky’s classes knew she was incisive and funny, but within the campus social taxonomy, she was overlooked — she was overweight and almost never drank much, stayed out late or dated. After a few minutes of listening to the stumbling conversation about sexual harassment, she raised her hand to make a different point, about the way the school’s social life revolved around appearance and money.

“Someone made the decision for me that I’m not pretty or wealthy enough to be in Section X,” she told her classmates, her voice breaking.

The room jumped to life. The students said they felt overwhelmed by the wealth that coursed through the school, the way it seemed to shape every aspect of social life — who joined activities that cost hundreds of dollars, who was invited to the parties hosted by the student living in a penthouse apartment at the Mandarin Oriental hotel in Boston. Some students would never have to seek work at all — they were at Harvard to learn to invest their families’ fortunes — and others were borrowing thousands of dollars a year just to keep up socially.

The discussion broke the ice, just not on the topic the deans had intended. “Until then, no one else had publicly said ‘Section X,’ ” Mr. Batchu said. Maybe it was because class was easier to talk about than gender, or maybe it was because class was the bigger divide — at the school and in the country.

That was only one out of 10 sessions. At most of the others, the men contributed little. Some of them, and even a few women, had grown to openly resent the deans’ emphasis on gender, using phrases like “ad nauseam” and “shoved down our throats,” protesting that this was not what they had paid to learn.

Patrick Erker was not among the naysayers — he considered himself a feminist and a fan of the deans. As an undergraduate at Duke, he had managed the women’s basketball team, wiping their sweat from the floor and picking up their dirty jerseys.

But as he silently listened to the discussion, he decided the setup was all wrong: a discussion of a sex-related episode they knew little about, with “89 other people judging every word,” led by professors who would be grading them later that semester.

“I’d like to be candid, but I paid half a million dollars to come here,” another man said in an interview, counting his lost wages. “I could blow up my network with one wrong comment.” The men were not insensitive, they said; they just considered the discussion a poor investment of their carefully hoarded social capital. Mr. Erker used the same words as many other students had to describe the mandatory meetings: “forced” and “patronizing.”

That week, Andrew Levine, the director of the annual spoof show, was notified by administrators that he was on academic and social probation because other students had consumed alcohol in the auditorium after a performance. (His crime: dining with visiting family instead of staying as he had promised in a contract.) He was barred from social events and put on academic probation as well.

That was just what students needed to believe their worst suspicions about the administration. Ms. Frei had not made the decision about Mr. Levine and worked to cancel his academic probation, he said later, but students called her a hypocrite, a leadership expert who led badly. Hundreds of students soon wore T-shirts that said “Free Andy” or “Unapologetic.”

“Daddy, why are the students hating on you?” Mr. Nohria’s teenage daughters asked him, he told students later.

A few days before commencement, Nathan Bihlmaier, a second-year student, disappeared while celebrating with classmates in Portland, Me. He had last been seen so inebriated that a bartender had asked him to leave a pub. When the authorities told students that Mr. Bihlmaier’s body had been dredged from the harbor, apparently after a fall, Mr. Nohria and Ms. Moon were standing beside them.

The first year of their experiment was ending with a catastrophe that brought home how little sway they really had over students’ actions. Mr. Bihlmaier had not even been the drinking type. In the spirit of feminist celebration, Ms. Sandberg gave a graduation address at the deans’ invitation, but during the festivities all eyes were on Mr. Bihlmaier’s widow, visibly pregnant with their first child.

Amid all the turmoil, though, the deans saw cause for hope. The cruel classroom jokes, along with other forms of intimidation, were far rarer. Students were telling them about vigorous private conversations that had flowed from the halting public ones. Women’s grades were rising — and despite the open resentment toward the deans, overall student satisfaction ratings were higher than they had been for years.

A Lopsided Situation

Even on the coldest nights of early 2013, Ms. Frei walked home from campus, clutching her iPhone and listening to a set of recordings made earlier in the day. Once her two small sons were in bed, she settled at her dining table, wearing pajamas and nursing a glass of wine, and fired up the digital files on her laptop. “Really? Again?” her wife, Anne Morriss, would ask.

Ms. Frei been promoted to dean of faculty recruiting, and she was on a quest to bolster the number of female professors, who made up a fifth of the tenured faculty. Female teachers, especially untenured ones, had faced various troubles over the years: uncertainty over maternity leave, a lack of opportunities to write papers with senior professors, and students who destroyed their confidence by pelting them with math questions they could not answer on the spot or commenting on what they wore.

“As a female faculty member, you are in an incredibly hostile teaching environment, and they do nothing to protect you,” said one woman who left without tenure. A current teacher said she was so afraid of a “wardrobe malfunction” that she wore only custom suits in class, her tops invisibly secured to her skin with double-sided tape.

Now Ms. Frei, the guardian of the female junior faculty, was watching virtually every minute of every class some of them taught, delivering tips on how to do better in the next class. She barred other professors from giving them advice, lest they get confused. But even some of Ms. Frei’s allies were dubious.

At the end of every semester, students gave professors teaching scores from a low of 1 to a high of 7, and some of the female junior faculty scores looked beyond redemption. More of the male professors arrived at Harvard after long careers, regaling students with real-life experiences. Because the pool of businesswomen was smaller, female professors were more likely to be academics, and students saw female stars as exceptions.

“The female profs I had were clearly weaker than the male ones,” said Halle Tecco, a 2011 graduate. “They weren’t able to really run the classroom the way the male ones could.”

Take the popular second-year courses team-taught by Richard S. Ruback, a top finance professor, and Royce G. Yudkoff, a co-founder of a private equity firm that managed billions of dollars. The men taught students, among other lessons, how to start a “search fund,” a pool of money to finance them while they found and acquired a company. In recent years, search funds had become one of the hottest, riskiest and most potentially lucrative pursuits for graduates of top business schools — shortcuts to becoming owners and chief executives.

The two professors were blunt and funny, pushing a student one moment, ribbing another one the next. They embodied the financial promise of a Harvard business degree: if the professors liked you, students knew, they might advise and even back you.

As Ms. Frei reviewed her tapes at night, making notes as she went along, she looked for ways to instill that confidence. The women, who plainly wanted to be liked, sometimes failed to assert their authority — say, by not calling out a student who arrived late. But when they were challenged, they turned too tough, responding defensively (“Where did you get that?”).

Ms. Frei urged them to project warmth and high expectations at the same time, to avoid trying to bolster their credibility with soliloquies about their own research. “I think the class might be a little too much about you, and not enough about the students,” she would tell them the next day.

By the end of the semester, the teaching scores of the women had improved so much that she thought they were a mistake. One professor had shot to a 6 from a 4. Yet all the attention, along with other efforts to support female faculty, made no immediate impact on the numbers of female teachers. So few women were coming to teach at the school that evening out the numbers seemed almost impossible.

As their final semester drew to a close, the students were preoccupied with the looming question of their own employment. Like graduates before them, the class of 2013 would to some degree part by gender after graduation, with more men going into higher-paying areas like finance and more women going into lower-paying ones like marketing.

Ms. Navab, who had started dating one of the men — with an M.D. and an M.B.A. — from the Ethiopian dinner, had felt freer to focus on her career once she was paired off. She was happy with her job at a California start-up, but she pointed out that she and some other women never heard about many of the most lucrative jobs because the men traded contacts and tips among themselves.

This was the lopsided situation that women in business school were facing: in intellectual prestige, they were pulling even with or outpacing male peers, but they were not “touching the money,” as Nori Gerardo Lietz, a real estate private equity investor and faculty member, put it. A few alumnae had founded promising start-ups like Rent the Runway, an evening wear rental service, but when it came to reaping big financial rewards, most women were barely in the game.

At an extracurricular presentation the year before, a female student asked William Boyce, a co-founder of Highland Capital Partners, a venture capital firm, for advice for women who wanted to go into his field. “Don’t,” he laughed, according to several students present.  Male partners did not want them there, he continued, and he was doing them a favor by warning them.

Some women protested or walked out, but others said they believed he was telling the truth. (In interviews, Mr. Boyce denied saying women should not go into venture capital, but an administrator said student complaints prompted the school to contact the firm, which he had left decades before.)

The deans had not focused on career choice, earning power or staying in the work force; they felt they first needed to address campus issues. Besides, the earning gap posed a dilemma: they were hoping fewer students would default to finance as a career. “Have the courage to make the choices early in your life that are determined by your passions,” Mr. Nohria told students.

Plenty of women had taken Mr. Ruback and Mr. Yudkoff’s classes on acquiring and running businesses, including Ms. Upton, who had delivered the crackerjack finance presentation. She counted 30 to 40 classmates planning search funds, all men except for a no-nonsense engineer named Jennifer Braus. The professors eventually decided to finance and advise Ms. Braus, hoping other Harvard women would follow.“Nothing succeeds like success,” Mr. Ruback said.

Ms. Upton decided to take a far lower-risk job managing a wealthy family’s investments in Pittsburgh, where her fiancé lived. “You can either be a frontier charger or have an easier, happier life,” she said.

Looking Ahead

Of all the ceremonies and receptions during graduation week, the most venerated was the George F. Baker Scholar Luncheon, for the top 5 percent of the class, held in a sunny dining room crowded with parents who looked alternately thrilled and intimidated by what their offspring had achieved.

In recent years, the glory of the luncheon had been dimmed by discomfort at the low number of female honorees. But this year, almost 40 percent of the Baker scholars were women. It was a remarkable rise that no one could precisely explain. Had the professors rid themselves of unconscious biases? Were the women performing better because of the improved environment? Or was the faculty easing up in grading women because they knew the desired outcome?

“To my head, all three happened,” Professor Piskorski said. But Mr. Nohria said he had no cause to think the professors had used the new software, and the subjective participation scores, to avoid gender gaps. “Sunshine is the best disinfectant,” he said, a phrase that he said had guided him throughout his project.

One of the Baker scholars was Ms. Boyarsky, the classroom truth-teller. Two hours after the luncheon, she stepped up to a lectern to address thousands of graduates, faculty members and parents. Of the two dozen or so men and only 2 women who had tried out before a student committee, she had beaten them all, with a witty, self-deprecating speech unlike any in the school’s memory.

“I entered H.B.S. as a truly ‘untraditional applicant’: morbidly obese,” she said.

The theme of her speech was finding the courage to make necessary but painful changes. “Courage is a brand new H.B.S. professor, younger than some of her students, teaching her very first class on her very first day,” she said. “Courage is one woman” — the one who reported the groping episode — “who wakes the entire school up to the fact that gender relations still have a long way to go at H.B.S.”

And, Ms. Boyarsky continued, she had lost more than 100 pounds during her final year at Harvard. “Courage was then me battling the urge to be defensive — something I believe I had been for a long time about this particular issue — and taking a hard, honest look within myself to figure out what had prevented change,” she said.

Even before she finished, her phone was buzzing with e-mails and texts from classmates. She was the girl everyone wished they had gotten to know better, the graduation-week equivalent of the person whose obituary made you wish you had followed her work. She had closed the two-year experiment by making the best possible case for it. “This is the student they chose to show off to the world,” Ms. Moon said. For the next academic year, she was arranging for second-year students to lead many of the trickiest conversations, realizing students were the most potent advocates.

The administrators and the class of 2013 were parting ways, their experiment continuing. The deans vowed to carry on but could not say how aggressively: whether they were willing to revise the tenure process to attract more female contenders, or allow only firms that hired and promoted female candidates to recruit on campus. “We made progress on the first-level things, but what it’s permitting us to do is see, holy cow, how deep-seated the rest of this is,” Ms. Frei said.

The students were fanning out to their new jobs, full of suspense about their fates. Because of the unique nature of what they had experienced, they knew, every class alumni magazine update and reunion would be a referendum on how high the women could climb and what values the graduates instilled — the true verdict on the experiment in which they had taken part.

As Ms. Boyarsky glanced around her new job as a consultant at McKinsey in Dallas, she often noticed that she was outnumbered by men, but she spoke up anyway. She was dating more than she had at school, she added with shy enthusiasm.

“I am super excited to go to my 30th reunion,” she said.

Brent McDonald and Hannah Fairfield contributed reporting.

DealBook: If Its Customers Love a Business, This Equity Firm Does, Too

DealBook: Steinway Sold to Private Equity Firm for $438 Million

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DealBook: JPMorgan to Spin Out Its Private Equity Unit

Mario Tama/Getty ImagesSince taking over as chief executive, Jamie Dimon has gradually reduced JPMorgan’s exposure to the risky business of buying and selling companies.

Jamie Dimon has long had a complicated relationship with private equity. Since taking over as chief executive of JPMorgan Chase in 2005, Mr. Dimon has gradually reduced the bank’s exposure to the risky business of buying and selling companies.

On Friday, Mr. Dimon announced that JPMorgan’s last remaining private equity unit, One Equity Partners, would be spun out into a separate company and raise its next fund as an independent firm.

The move comes as banks are facing regulatory pressure to reduce their exposure to risky businesses, but the divestment of One Equity, which manages $4.5 billion of the bank’s money, was not in response to that, according to a person briefed on the matter.

Instead, this person said, the decision is a reflection of JPMorgan’s emphasis on its client businesses rather than making investments off the firm’s balance sheet. Last year, the bank was buffeted by a multibillion-dollar trading loss by its chief investment office in London.

The One Equity business is the legacy private equity arm of Bank One, the Ohio bank that Mr. Dimon ran and sold to JPMorgan in 2004. At that time, JP Morgan had two other private equity divisions — JPMorgan Partners, a unit that made a broad range of investments, and Corsair, an arm that invested in financial services.

Mr. Dimon took over as chief executive of the combined company in 2005. That year, the bank surprised Wall Street by keeping the smaller One Equity Partners and splitting off the bigger business. JPMorgan Partners is now an independent private equity firm called CCMP, and Corsair was spun out in 2006 into an independent firm.

One of the bank’s reasons for de-emphasizing its private equity investments — especially the ones that were made by its largest unit, JPMorgan Partners — is that it didn’t want to be in businesses that directly competed with some of its prized private equity clients, like Blackstone Group and Kohlberg Kravis Roberts. JPMorgan’s investment bank has a very lucrative business both advising and making loans to the world’s largest buyout firms.

One Equity was started in 2001 by Dick Cashin, its managing partner and a former Olympic rower. Among the firm’s more successful deals were its buyout of the health care company Quintiles and its acquisition of Polaroid out of bankruptcy. Jacques Nasser, the former chief executive of the Ford Motor Company, is a One Equity senior executive. The firm will continue to manage its existing portfolio of investments for JPMorgan, and sell them off over time.

“I have worked with the team at OEP for the past 12 years and have a lot of respect for all that they have accomplished and the great value they have delivered to the firm,” Mr. Dimon said in a statement.

JPMorgan’s decision to divest itself of One Equity comes as the debate over the Volcker Rule drags on. The passage of the Dodd-Frank financial overhaul in 2010 placed restrictions on how much capital banks could invest in hard-to-sell assets like private equity.

A number of banks have jettisoned much of their buyout operations, including Bank of America and Citigroup. But with the continued uncertainty surrounding the Dodd-Frank law, others have maintained their private equity arms, like Goldman Sachs Capital Partners and Morgan Stanley Global Private Equity.

DealBook: Private Equity Capitalizes on Chinese Firms’ Depressed Shares

HONG KONG – If you can’t buy them, bankrupt them.

Three months ago, Ambow Education Holding, a troubled operator of tutoring centers in China that was listed on the New York Stock Exchange, was the target of a $108 million privatization bid by Baring Private Equity Asia.

On Monday, Baring emerged as one of several big shareholders that had succeeded in pushing Ambow into provisional liquidation by a court in the Cayman Islands, where the company is registered, after a dispute with management over an investigation into possible financial misconduct.

Rapid downfalls have not been uncommon among Chinese companies listed in the United States in recent years, after a wave of accounting scandals led to a broad sell-off of such stocks. At the same time, a growing number of private equity firms have sought to capitalize on depressed share prices of Chinese companies by making buyout offers.

But Ambow’s situation stands out.

“Perhaps no company ever transited as quickly from a private equity firm’s sought-after takeover target to being liquidated,” said Peter Fuhrman, chairman of China First Capital, an investment bank and advisory firm based in Shenzhen, China.

Ambow was taken public in 2010 in a $107 million deal led by JPMorgan Chase and Goldman Sachs. Its market value rose to more than $1 billion that year but came under pressure throughout 2011, along with many other Chinese stocks.

Then in July 2102, Ambow disclosed in stock exchange filings that a former employee had come forward claiming “financial impropriety and wrongful conduct” related to the company’s purchase of a training school in China in 2008.

Ambow said it had hired outside lawyers to help its audit committee carry out an internal investigation of the matter and that it would not comment further. Its shares promptly dropped by half, from more than $4 apiece to just over $2, then continued to slide until early this year.

Baring, a firm based in Hong Kong that used to be part of the Dutch financial services company ING, began its privatization bid for Ambow on March 15 at $1.46 per American depositary share. It was a 45 percent premium to the share price at the time.

Then things got messy. On March 18, three of Ambow’s four independent directors resigned. On March 22, the law firm Fenwick & West resigned after nine months of leading the investigation into possible financial misconduct. That same day, the Chinese affiliate of PricewaterhouseCoopers, also known as PwC, resigned as Ambow’s auditor.

“In its letter, PwC stated it was resigning as a result of its concerns that the investigation may not be given the necessary resources and time, and the presence of existing management may make conducting an investigation of the scope that PwC believes is warranted unlikely,” Ambow said in a filing. The New York Stock Exchange suspended trading in the shares.

Baring withdrew its privatization bid on March 25, 10 days after it was made, citing the resignations and the trading suspension. It said in a letter that “as a result of these unexpected events, we have concluded that it is not possible for us to proceed.”

The petition to the Cayman court to liquidate Ambow was filed in April by a fund run by the Asian unit of the Avenue Capital Group, a New York investor in distressed stocks and bonds that owns 21.6 percent of Ambow’s shares.

According to filings on Monday to the United States Securities and Exchange Commission announcing the success of the petition, the move was supported by Baring, which has a 10 percent stake in Ambow, and an investment unit of the Australian bank Macquarie, which holds an 11.6 percent stake.

The petition accused Ambow’s chief executive, Jin Huang, of abusing her power in relation to the investigation into possible financial misconduct and of “obstructionist tactics designed to entrench her control of Ambow.”

In a statement last month, Ambow firmly rejected the accusations, saying there was “no basis” for any of the claims and that “the filing of the petition and the relief it seeks are wholly inappropriate.”

In its ruling on Friday, the Cayman court appointed the auditing firm KPMG as provisional liquidator for Ambow. KPMG will also take control of the investigation into possible financial misconduct.

The situation is complicated because Ambow’s operating business — like many Chinese companies listed in the United States — is based in China but controlled by the offshore-registered listed company through a series of complex holding structures called variable interest entities, or V.I.E.’s.

One such foreign control structure was recently ruled invalid by China’s highest court.

“Right now our control over the operating assets in China has been quite limited,” Tiffany Wong, a partner at KPMG China and herself one of the court-appointed liquidators, said on Tuesday. “We haven’t got access to the books and records of company at the moment.”

Monday, Tuesday and Wednesday are public holidays in mainland China, and Ms. Wong plans to meet with Ambow management in Beijing later this week. “We will be seeking to stabilize the company,” she said.

At Hedge Funds and Private Equity, Lucrative Paydays

We rely on filings required by the Securities and Exchange Commission for public companies. That means we are missing entire categories of businesses: privately held corporations, most hedge funds and many private equity firms. Some sleuthing shows that payouts given to private equity titans and hedge fund managers were often significantly higher than that of the mere mortals on our list.

Four of the largest private equity firms — the Carlyle Group, Apollo Global Management, the Blackstone Group and Kohlberg Kravis Roberts & Company — went public in recent years, a move that required them to begin disclosing executive pay. Their executives don’t show up on our main list because we look only at companies with total revenue of more than $5 billion. Unlike executive pay at most corporations, much wealth here is derived from their ownership stakes in these firms, and, each year, they get payouts based on their stakes.

Distributions at private equity firms are analogous to dividends corporations pay shareholders, said Victor Fleischer, a professor at the University of Colorado Law School and a columnist for DealBook. Private equity executives may also hold direct ownership stakes in the funds managed by the firm, so distributions from those funds wouldn’t necessarily show up in the public data, he noted.

If all of the distribution payouts were factored in, some of these executives’ pay packages would dwarf those on our list.

Consider Leon Black, C.E.O. of Apollo Global Management, among the largest private equity firms with $2.86 billion in 2012 revenue. He took in more than $125 million last year. A tiny piece — $287,000 — was from salary and other base compensation. The bulk was from distributions based on the 92.7 million shares he owns in the firm, according to Equilar calculations.

Steve Schwarzman, founder and chief executive of the Blackstone Group, took in $8.4 million in compensation last year, and his distributions earned him an additional $204 million. “Mr. Schwarzman has a salary and does not take a bonus,” said Peter Rose, a Blackstone spokesman, in response to Equilar’s research. “He gets dividends on his Blackstone stock, just like the public, and he gets his share of the gains in the funds he invests in. His interests perfectly match up with our fund investors and our public shareholders.”

The wealth of executives at Kohlberg Kravis Roberts was harder to determine, because it disclosed only distribution payouts on common units and not on the convertible ownership units held by top executives. But even excluding those payouts, the two co-chiefs at K.K.R., Henry R. Kravis and George R. Roberts, made more than $35 million each in compensation.

These large payments would not be obvious to the casual reader of proxy statements. Only the salary, bonuses and certain other pay like stock grants are listed plainly on the annual compensation tables in S.E.C. filings. To determine the big dividend payouts, Equilar pieced together information in other parts of the company’s annual report.

A spokesman at Apollo Global declined to comment on its compensation, and representatives for Carlyle and K.K.R. did not reply to requests for comment.

HEDGE fund managers typically prize secrecy. Only a handful of hedge funds — including Och-Ziff, Fortress Investment and Oaktree Capital Management — are publicly traded and thus required to disclose their executive pay packages.

Each year, AR magazine estimates hedge fund managers’ pay based on the fees they charge clients as well as the change in value of their personal stakes. In 2011, Ray Dalio, the founder of Bridgewater Associates, had an estimated payday of $3.9 billion (yes, billion with a “b”), according to AR magazine. The activist investor Carl C. Icahn was estimated to have earned $2.5 billion in 2011. The 2012 list will be published in the coming weeks.

By comparison, the publicly traded hedge funds paid their C.E.O.’s relatively meager amounts. Oaktree Capital’s president, Bruce Karsh, made about $12.2 million in base compensation and about $64 million in distributions in 2012. (Forbes estimated his net worth at $1.65 billion.)

To be fair, many hedge fund managers have most of their wealth tied up in the funds themselves. For instance, Steven A. Cohen, one of the consistently top-paid hedge fund managers, owns more than half of the estimated $15 billion in assets managed by his firm, SAC Capital.

Mintz Levin Takes Private Equity Partner From Latham

As it makes another attempt to grow in the San Francisco Bay Area, Mintz Levin has hired a corporate partner from Latham & Watkins.

Robert Burwell will join Mintz, Levin, Cohn, Ferris, Glovsky and Popeo's newly launched San Francisco office this week.

Burwell, who represents middle-market private equity firms and companies, was a member of Latham's private equity practice. He said he will have more flexibility to set the right rates for his clients at Mintz. He expects most of them to come with him.

"I feel like Mintz is a really good fit for [middle-market work], whereas Latham has been moving pretty steadily up market," he said.

Burwell is one of the first lateral partners to join Mintz in San Francisco, where the firm opened up last April after shuttering its outpost in Silicon Valley. The firm set up shop in San Diego and Palo Alto in 2006, but the Silicon Valley office -- once home to about 15 lawyers -- had dwindled to just a handful of practitioners by last March. San Francisco office managing partner Paul Churchill, who joined the firm in October, said the lateral partners Mintz has attracted since opening in S.F. show it was the right move for the firm.

A hire from Latham & Watkins will help the firm gain momentum, legal recruiter Larry Watanabe said. And as the office's first private equity lawyer, Burwell will broaden Mintz's corporate practice in San Francisco considerably, Churchill noted. He added that he is interviewing other potential lateral partners and hopes to hire lawyers who do work in venture capital and emerging companies, among other practices, in the coming months.

"For any new office, corporate is a core and essential practice area," Watanabe said. "It can often be the most difficult practice area to gain traction."

Burwell said there are no plans for other lawyers to move with him from Latham.

"Rob has been a terrific colleague, and we wish him well," said Karen Silverman, managing partner of Latham's San Francisco office.

King & Wood Mallesons Recruits Private Equity Chief From Baker & McKenzie

Baker & McKenzie's former Sydney-based private equity head is joining King & Wood Mallesons.

Mark McNamara, who was also the Australia corporate head for Baker & McKenzie, will lead the private equity practice for King & Wood Mallesons as well.

He is one of the best-known lawyers advising private equity shops on deals in Australia. McNamara's clients have included Kohlberg Kravis Roberts & Co. and CCMP Capital.

Last year, he advised U.K. private equity firm TDR Capital on its $689 million acquisition of Queensland-based Ausco Modular, a maker of portable buildings. McNamara last year also advised KKR on the $4 billion sale of its stake in Australian television network Seven Media Group to West Australian Newspapers Holdings Ltd.

McNamara has led Baker & McKenzie's global private equity group for three years. He joined Baker & McKenzie in 2000 after a stint in the London private equity group of Clifford Chance. He began his career as an associate at Clayton Utz.

DealBook: European Private Equity Firms Seek Nontraditional Loans Amid Debt Crisis

LONDON — As the sovereign debt crisis has slammed Europe, Cinven has had to get creative to finance buyouts.

When the London-based private equity firm wanted to buy CPA Global this year for $1.5 billion, Cinven looked beyond banks, the usual source of money. Along with debt from HSBC and JPMorgan Chase, it secured almost $200 million of higher-interest loans from nontraditional lenders. It also had to spend roughly $600 million of its own cash.

“The debt markets have been challenging since 2007,” said Matthew Sabben-Clare, a partner at Cinven. “There’s a degree of selectivity by the banks over geographies and certain industries. Banks are more regionally focused than before.”

Europe’s financial woes are forcing private equity firms like Cinven to revise their deal-making playbooks.

As banks pull back, private equity firms are increasingly turning to high-yield bonds, mezzanine loans and other types of debt that carry higher interest rates. Some are appealing directly to institutional investors like pensions and sovereign wealth funds to finance specific deals.

Given the tight credit, most firms are having to put up more capital to get deals done. Cash now accounts for more than 50 percent of the average European buyout, according to the data provider S.&.P. Capital I.Q. Five years ago, that number was 33 percent. In the United States, cash represents 38 percent of the average buyout, mainly because firms have access to a variety of financing options, like capital markets.

Private equity firms “are having to widen the net to find the loan financing they need,” said Kristian Orssten, head of European high-yield and loan capital markets at JPMorgan Chase in London. “Many lenders in Europe are getting to grips with their own funding challenges.”

The financing troubles for buyouts are reflected in the weak deal-making environment.

Although firms are raising money to buy distressed assets in Europe, many have remained on the sidelines as the debt crisis continues. So far this year, European acquisitions by private equity firms have totaled $23.2 billion, a 38 percent decline from the same period in 2011, according to Thomson Reuters.

Firms have pulled some deals altogether, fearing that asset prices could fall even further. After months of negotiations, Blackstone and BC Partners dropped their $3.2 billion bid for the frozen-food company Iglo after failing to come to terms with its private equity owner, Permira, according to people with direct knowledge of the matter who declined to speak publicly.

In  good times, European buyout firms relied heavily on cheap bank lending. Flush with cash, the Continent’s financial institutions provided almost 80 percent of financing on deals, often keeping the debt on their own balance sheets instead of selling it off to other investors.

But as the debt crisis worsened, banks curbed their lending in an effort to meet stricter capital requirements, which penalize firms for holding risky investments like debt connected to private equity deals. Firms like Deutsche Bank and Royal Bank of Scotland have sold loans at a discount to other investors to shed unwanted assets.

Even when banks are willing to finance deals, they are limiting their bets. Local banks are focusing mostly on deals in their home countries, and they are often willing to finance only a portion of the buyouts.

As a result, private equity firms are often tapping multiple lenders, even when the costs of a buyout are less than $1 billion. To finance its £465 million ($749 million) acquisition of the British company Mercury Pharma, Cinven capitalized on its 20-year relationships with certain banks, securing £235 million of financing from a consortium of firms, including Lloyds Banking Group.

With banks being selective, private equity firms have had to tap other markets.

High-yield debt investors, in search of better yields, have been receptive. The European private equity firm Apax issued almost $1 billion of high-yield bonds in February as part of its $2.1 billion acquisition of the telecommunications company Orange Switzerland. Intelsat, one of the world’s largest satellite operators, owned by a BC Partners-led group, raised $1.2 billion this year in an effort to refinance its debt.

“The high-yield market in Europe is exploding,” said a partner from a leading European private equity firm, who spoke on condition of anonymity. “It’s attracting a lot of institutional investors who are chasing high returns.” The amount of European high-yield bonds connected to investments from private equity firms has risen 49 percent, to $13.5 billion, since 2007, according to the data provider Dealogic.

Private equity firms are also stepping in to fill the void. The Scandinavian firm EQT Partners turned to a consortium of financial players, including Kohlberg Kravis Roberts, for around $510 million of mezzanine financing for its $2.3 billion acquisition of the German medical supplies company BSN Medical in June.

“As bank funding has become more expensive, it has opened up an opportunity for new types of financing,” said Sachin Date, head of private equity for Europe, the Middle East, India and Africa at the accounting firm Ernst & Young in London.

But such debt carries its own set of risks. Generally, loans from nontraditional lenders carry higher interest rates, which can be costly for companies, especially in the current economic conditions. If the financial burden became too high, it could force borrowers to default on their loans and exacerbate the region’s woes.

“The crisis has hit much harder than people had expected,” said Nicolas de Nazelle, a managing partner at the private equity adviser Triago in Paris.