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Stephen Schwarzman, Billionaire Blackstone Founder, Earned $750 Million Last Year, Pay Expert Says

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Blackstone Group CEO Stephen Schwarzman Made As Much As $750 Million in 2011
Blackstone Group CEO Stephen Schwarzman Made As Much As $750 Million in 2011

How much did private equity chief Stephen Schwarzman make last year? Depends who you ask.

The Wall Street Journal and Reuters both reported that Schwarzman earned approximately $213.5 million in compensation in 2011. Businessweek estimated that the founder and longtime CEO of Blackstone Group made $148.5 million.

The number is closer to $750 million, said Paul Hodgson, an analyst at GMI Ratings who studies executive compensation. Hodgson wrote about the wide discrepancy in a blog post on Forbes.com on Friday. He said he arrived at his higher estimate by digging through Blackstone's filings with the Securities and Exchange Commission, which he said buries a lot of the relevant detail about Schwarzman's compensation package in footnotes.

Blackstone argued that the money in question is cash that Schwarzman received from his ownership stake in the firm and doesn't count as compensation in any traditional sense. "It is totally absurd to say that Steve 'earned' $750 [million] in compensation last year or even came close to it," a Blackstone Group spokesman told HuffPost, via email. "The majority of that sum represents his ownership interest in Blackstone that has vested over four years."

As the debate intensifies over how much private equity executives like Schwarzman should be paying in taxes, their compensation is under newfound scrutiny. In late January, Mitt Romney, who once ran the private equity firm Bain Capital, revealed that he paid a 13.9 percent tax rate in 2010 and an estimated 15.4 percent in 2011. Last month, President Barack Obama's administration unveiled a plan, backed by congressional Democrats, to tax private equity profits as income up to 35 percent, rather than as investment at a rate of 15 percent.

The industry's not rolling over. In his blog post, Hodgson noted Schwarzman's now-famous 2010 comments in response to the demand for a higher tax rate: “It’s a war. It’s like when Hitler invaded Poland in 1939,” Schwarzman reportedly said.

"Now, I know he apologized for this remark, but with pay at this level we can understand his concern," Hodgson wrote.

Hodgson said he arrived at his figure by including the amount of money Schwarzman made from shares in Blackstone that became eligible for cash redemption in 2011 -– a figure that, he said, totals around $637 million. This figure, he argued, is the most accurate reflection of Schwarzman's total Blackstone-related compensation. Hodgson criticized the SEC for not requiring private equity firms to more clearly report these earnings.

"The SEC's disclosure requirements don't allow shareholders to accurately assess how much compensation is being received by an executive," he told The Huffington Post.

The SEC defended its filing requirements. “Different people may be looking for different information from our comprehensive executive compensation disclosure requirements," spokesman Jon Nester wrote in a statement. "Information about stock and option compensation realized during the year … are required to be disclosed in a separate, standalone table."

While it can be difficult to accurately assess executive compensation in other industries, this discrepancy highlights the particularly complex business of determining pay in a world where the bulk of executive compensation comes from a variety of sources (from carried interest, to money management fees, to dividend payouts, to ownership in the firm itself) beyond traditional salary. Which, in Stephen Schwarzman's case, was $350,000 in 2011.

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