Blackstone Group LP, the world’s largest private-equity firm, was asked by the U.S. Securities and Exchange Commission for more detail about how its top executives are paid, as buyout firms continue to confront the scrutiny that comes with public listings.
The SEC, in a letter dated April 25, asked New York-based Blackstone for further information about compensation for the firm’s so-called named executive officers. The letter, along with the company’s May 9 response, was disclosed in filings today by Blackstone.
The correspondence underscores the additional information required when private partnerships become publicly traded companies. Carlyle Group, the world’s second-largest private-equity company, has selected bankers to lead its own IPO, after competitors such as KKR & Co. and Apollo Global Management LP gained public listings in New York in the past 12 months.
Blackstone Chairman Stephen Schwarzman has “sole discretion” to adjust executives’ compensation and their portion of profits tied to the firm’s funds, a measure known as carried interest, according to the letter. The SEC pressed Blackstone to spell out in future filings how Schwarzman made those determinations.
The four-page letter, a response to the firm’s 2010 annual report filed earlier this year, also asked Blackstone for more information about pending litigation, specifically a class-action lawsuit tied to the firm’s 2007 initial public offering.
Blackstone Chief Financial Officer Laurence Tosi responded in a May 9 letter, which said that executives’ compensation is based on “internal measures which are applied to a number of complex individual businesses and partnerships.”
The firm said it would detail in future filings how compensation is based on the performance of its funds, the growth in profit and distributable earnings, as well as “Blackstone’s success in achieving strategic objectives which we will outline as applicable in the relevant period.”
The SEC did not request additional information after the response.
Blackstone, created in 1985 by Schwarzman and Peter G. Peterson, has expanded beyond private-equity deals into real estate investments, fund of hedge funds and restructuring advice.
Salary and Bonus
Blackstone paid President Tony James, Vice Chairman J. Tomilson Hill and Tosi $350,000 each in salary last year, according to the firm’s annual report. James received a $23.5 million bonus, the filing shows, while Hill got a bonus of $7.36 million and a stock award worth $8 million, not including $6.3 million in deferred compensation. Tosi received a $4.65 million bonus and $5.44 million in stock.
All of the executives have additional potential compensation tied up in Blackstone shares. Schwarzman, who earned $350,000 and no bonus in 2010, held vested shares worth $399.2 million at the end of last year. He holds shares worth $544.7 million that haven’t vested, according to the filing.
Blackstone rose 23 cents, or 1.44 percent, to $16.25 at 4 p.m. in New York Stock Exchange composite trading. The stock is trading at roughly half of its IPO price of $31 a share.