The best-paid CEO in the land in 2008 was -- drumroll, please -- NOT former Lehman Brothers chief exec Dick Fuld! Nope, it's Blackstone Group supremo Stephen Schwarzman, according to shareholder advocate The Corporate Library.
Schwarzman made $702.4 million last year, putting him at least a mega-yacht's worth of dough ahead of No. 2 Larry Ellison, commodore of software maker Oracle. Only $2.3 million of Schwarzman's compensation came from stock and base pay, which was $350,000. The big bucks, to the tune of $699.8 million, came from his shares vesting from Blackstone's 2007 IPO.
Schwarzman's total realized comp in 2007 was roughly $354,000, which means he got a raise last year of 200,000 percent. But here's the beauty part. "The entire compensation package. . . was decided not by a compensation committee but by Mr. Schwarzman himself, who under the NYSE listing standards for limited partnerships is permitted to determine both his own compensation and that of the other named executive officers," The Corporate Library says in a forthcoming report about top-earning CEOs. It's good to be the king (click on image to expand).
Schwarzman was the only financial services exec among the top 10 highest-paid U.S. CEOs last year. Seven others who made the list are oil industry folks, while Abercrombie & Fitch boss Michael Jeffries filled out the list with a payout of $71.8 million.
Look, Schwarzman obviously isn't the only master of the universe who's rolling in it. And it's easy to goggle at such numbers and rage about the unfairness of it all. But fair is a relative notion, highly subjective and, come to think of it, almost certainly a myth. Everyone knows (or should) that personal income is no barometer of personal worth, and often it's a poor indicator of merit. Point is, executive pay -- especially the kind that comes in stock -- is supposed to align the machers' interests with those of the schlubs.
The latter category would include Blackstone shareholders who didn't have the sense to bail when the going was good. Although recovering of late, the buyout firm's shares have cratered since closing at $35.06 after going public in June 2007. Factoring in the costs of the offering, Blackstone recorded a net loss in the second quarter of $164 million (GAAP basis).
Yes, part of Schwarzman's comp is subject to a claw-back provision. So what? He got an equity grant of $4.7 billion for the IPO, with the shares periodically vesting over the next four years. In other words, he's guaranteed to make a bundle, although perhaps a smaller one, even if Blackstone's stock price keeps heading south.
In other words, regardless of how Blackstone performs, Schwarzman is likely to be topping CEO pay lists for years to come.