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Why Bain Capital doesn't track lost jobs

December 22, 2011: 3:09 PM ET

There's a good reason why private equity firms don't track jobs created or destroyed.

Mitt Romney likes to say that he helped create around 100,000 jobs through his work at Bain Capital, even though Bain Capital itself claims to have never tracked such figures. And since reporters rarely challenge Romney on the claim (latest example here), it's basically Romney's word vs. that of skeptics.

But earlier today someone asked me why Bain Capital didn't track such numbers. Shouldn't it have, as a measure of its effect on the overall economy? Or, at the very least, because employment growth/decay would be an important metric for an investment firm to have handy when approaching a new takeover candidate?

My answer is that while net employment may indeed be helpful to track, it would be extremely difficult to do. In fact, I think people would poke all sorts of legitimate holes in Bain's numbers -- and, by extension, Romney's credibility -- were they to exist.

For example, take the case of Staples (SPLS) -- the office supply superstore that received early-stage financing from Bain in 1986. Staples currently has more than 90,000 employees, but how many of those should Bain take credit for? One could argue that Bain gets to count them all, since without Bain the company may not even exist today. On the other hand, Staples went public three years later and Bain hasn't actually been an investor for nearly two decades. Should it stop counting on the day it no longer owns shares? And what if it only held a minority position, instead of a control position?

Another example would be a franchising platform like Dunkin' Brands (DNKN) or Burger King (BKC)? Should Bain count only the employees getting paychecks from the parent company, or everyone else on down the line?

Or what about when companies do layoffs in preparation for a takeover (something which often happens)? Do those count in the negative column? Or what if Bain takes an underperforming company, helps turn around its finances by cutting jobs and then sells it to someone else who is able to hire based on growth Bain helped create?

And should quality of jobs matter? Is creating 100,000 minimum-wage jobs better than creating 50,000 jobs that pay a living wage? And do we count jobs at Bain Capital itself, which has over 100 investment professionals and an untold number of support staff?

There are no correct answers to any of the above questions. Just opinions. No wonder Bain and many other private equity firms don't think it's worth the hassle.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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