PRIVATE equity firm Blackstone Group LP, which plans to soon go public in an IPO, stunned observers yesterday with revelations that its CEO Stephen Schwarzman received almost double the combined compensation of Wall Street’s five biggest investment bank CEOs.
AP reports that the $400 million Schwarzman made in 2006 is on top of about $677 million he stands to make on his stake in the firm during the eagerly anticipated IPO of 12.3% of Blackstone’s management arm.
By contrast, half of the CEOs of the S&P 500 companies reporting so far this year earned just over 8.3 million, according to an analysis by the AP.
Schwarzman’s pay was almost twice the combined total of the CEOs of Goldman Sachs Group Inc., Merrill Lynch & Co., Lehman Brothers Holdings Inc., Bear Stearns Cos., and Morgan Stanley, said the news agency.
This is the first time analysts have seen information about Blackstone’s compensation plans. Interest in the IPO, expected to value the company at about $32 billion, is on a par with that generated when Goldman Sachs went public in 1999. The company was launched in 1985 with a $400,000 investment.
The new corporate bad boys
Mainstream corporate America may have reason to smile about Blackstone’s payday disclosures. Not only does it make their average pay look modest, but it also helps cast private equity firms as the new bad boys of business.
Said one corporate governance commentator to the AP:
“It is a really surprising number,” said Richard Ferlauto, director of pension and investment policy for the American Federation of State, County and Municipal Employees, about Schwarzman’s compensation package. “There’s a concentration of the super-wealthy that is being created in the financial services marketplace that is unhealthy for the rest of the economy.”
How long before we see a full-scale public and political backlash against the private equity juggernaut?