3 Brook. J. Corp. Fin. & Com. L 89 (2008-2009)
Looting: The Puzzle of Private Equity

handle is hein.journals/broojcfc3 and id is 93 raw text is: LOOTING: THE PUZZLE OF PRIVATE EQUITY
Daniel J.H. Greenwood*
In 2007, The Blackstone Group (Blackstone), a publicly traded private
equity firm, paid its Chief Executive Officer (CEO) Steven Schwarzman
roughly $350 million in cash compensation. Including the stock he received
in connection with Blackstone's public offering, Schwarzman's personal
compensation for the year was over $5 billion.'
Five billion dollars is a stunningly large sum. For comparison, in 2007-
08, the Chicago public school system spent only $4.648 billion to fund
44,417 employees, including 24,664 teachers, to educate 408,601 students
in 655 schools.2 Alternatively, Schwarzman's pay, by itself, could have
paid for a Nimitz class aircraft carrier (approximately $4.5 billion),3 with
enough left over to operate Princeton University for six months-all 5,400
employees and 160 buildings necessary to educate 7,085 students, publish
2,000 scholarly works per year, run a 6.5 million volume library and a
museum with over 72,000 works of art, and generally operate one of the
world's great research universities.4
In 2006, four American hedge fund managers-James Simons, Kenneth
Griffen, Edward Lampert and George Soros-reportedly received more
* Professor of Law, Hofstra University Law School. Thanks to Jim Fanto, the Journal
editors, and my fellow panelists.
1. George Anders, For Now at Least, Blackstone's Chiefs Decide Their Own Pay, WALL ST.
J., Mar. 26, 2008, at A2; Joe Bel Bruno, Blackstone's Schwarzman makes $5.13B, HUFFINGTON
POST, Mar. 12, 2008, available at http://www.huffingtonpost.com/2008/03/12/blackstones-
schwarzman-m n 91193.html?referer-sphe-rerelated content&referer-sphere related-content
(last visited Nov. 22, 2008). Blackstone Group L.P., Annual Report (Form 10-K), at 134-36, 145,
147 (Dec. 31, 2007) (describing $729 million award of vested Blackstone Partnership
Participation Units; $350 million cash payments to Schwarzman; $4.773 billion grant of unvested
Blackstone Participation Units; and purchase of ownership interests from Schwarzman for $684
million). Peter G. Peterson, Blackstone's Chairman of the Board but better known for his long
campaign to privatize Social Security, received at least $1.4 billion in vested Participation Units in
connection with the transaction, and payment of $1.9 billion for his ownership interest in the
predecessor firm. Id. at 136, 147. At year end, Schwarzman was beneficial owner of almost 234
million Participation Units, worth $7.24 billion at the initial public offering price, and Peterson
owned about 45 million Units, valued at about $1.4 billion. Id. at 145. Prior to going public,
Blackstone was not required to disclose compensation, so it is not clear over what period
Schwarzman and Peterson received the interests that were cashed out in the IPO or what other
compensation they received in earlier years.
2. Chicago Public Schools, CPS at a Glance, http://www.cps.kl2.il.us/AtAGlance.html (last
visited Nov. 22, 2008). Most data from fiscal year 07-08.
3. US Navy, Aircraft Carriers - CV, CVN, http://www.navy.mil/navydata/fact display.asp?
cid=42-00&tid=200&ct=4 (last visited Nov. 22, 2008).
4. Princeton's fiscal 2006 budget was $1 billion. Princeton University, Finances, A Princeton
Profile 2007-2008 (2007), http://www.princeton.edu/pr/facts/profile/07/finances/; Princeton
University, About Princeton University (2007), http://www.princeton.edu/pr/facts/profile/07/
about/; Princeton University, Scholarship and Research, http://www.princeton.edu/pr/facts/profile/
07/scholarship/;  Princeton  University,  Princeton  Art    Museum,    Collections,

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