filings.toolsItem 11. Executive Compensation
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Item 11. Executive Compensation
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Compensation Discussion and Analysis
Overview of Compensation Philosophy and Program
The intellectual capital collectively possessed by our senior managing directors (including our named executive officers) and other employees is the most important asset of our firm. We invest in people. We hire qualified people, train them, encourage them to provide their best thinking to the firm for the benefit of the investors in the funds we manage, and compensate them in a manner designed to retain and motivate them and align their interests with those of the investors in our funds.
Our overriding compensation philosophy for our senior managing directors and certain other employees is that compensation should be composed primarily of (a) annual cash bonus payments tied to the performance of the applicable business unit(s) in which such employee works, (b) performance interests (composed primarily of Performance Allocations, commonly referred to as carried interest, and incentive fee interests) tied to the performance of the investments made by the funds in the business unit in which such employee works or for which he or she has responsibility, (c) deferred equity awards reflecting the value of our Class A common stock, and (d) additional cash payments and equity awards tied to extraordinary performance of such employee or other circumstances (for example, if there has been a change of role or responsibility). We believe base salary should represent a significantly lesser component of total compensation. We believe the appropriate combination of annual cash bonus payments and performance interests or deferred equity awards encourages our senior managing directors and other employees to focus on the underlying performance of our investment funds, as well as the overall performance of the firm and interests of holders of our shareholders. To that end, the primary form of compensation to our senior managing directors and other employees who work in operations related to our carry funds or funds that pay incentive fees is generally a combination of annual cash bonus payments related to the performance of those carry fund operations, carried interest or incentive fee interests and, in specified cases, deferred equity awards. Along the same lines, the primary form of compensation to our senior managing directors and other employees who do not work in such fund operations is generally a combination of annual cash bonus payments tied to the performance of the applicable business unit in which such employee works and deferred equity awards.
Employees at higher total compensation levels are generally targeted to receive a greater percentage of their total compensation payable in annual cash bonuses, participation in performance interests, and deferred equity awards and a lesser percentage in the form of base salary compared to employees at lower total compensation levels. We believe that the proportion of compensation that is “at risk” should increase as an employee’s level of responsibility rises.
Our compensation program includes significant elements that discourage excessive risk-taking and aligns the compensation of our employees with the long-term performance of the firm. For example, notwithstanding the fact that for accounting purposes we accrue compensation for the Performance Plans (as defined below) related to our carry funds as increases in the carrying value of the portfolio investments are recorded in those carry funds, we only make cash payments to our employees related to carried interest when profitable investments have been realized and cash is distributed first to the investors in our funds, followed by the firm and only then to employees of the firm. Moreover, if a carry fund fails to achieve specified investment returns due to diminished performance of later investments, our Performance Plans entitle us to “clawback” carried interest payments previously made to an employee for the benefit of the limited partner investors in that fund, and we escrow a portion of all carried interest payments made to employees to help fund their potential future “clawback” obligations, all of which further discourages excessive risk-taking by our employees. Similarly, for our investment funds that pay incentive fees, those incentive fees are only paid to the firm and employees of the firm to the extent an applicable fund’s portfolio of investments has profitably appreciated in value (in most cases above a specified level) during the applicable period. In addition, and as noted below with respect to our named executive officers, the requirement that we have our professional employees invest in certain of the funds they manage directly aligns the interests of our professionals and our investors. In most cases, these investments represent a significant percentage of
employees’
after-tax
compensation. Lastly, because our equity awards have significant vesting or deferral provisions, the actual amount of compensation realized by the recipient will be tied directly to the long-term performance of our Class A common stock. In addition, in applicable jurisdictions, specifically in the European Union, our compensation program includes additional remuneration policies that may limit or otherwise alter the compensation for certain employees consistent with local regulatory requirements and aimed at, among other things, discouraging inappropriate risk-taking and aligning compensation with the firm’s strategy and long-term interests consistent with our general compensation program.
We believe our current compensation and benefit allocations for senior professionals are best in class and are consistent with companies in the alternative asset management industry. We do not generally rely on compensation surveys or compensation consultants. Our senior management periodically reviews the effectiveness and competitiveness of our compensation program, and such reviews may in the future involve the assistance of independent consultants.
Personal Investment Obligations
. As part of our compensation philosophy and program, we require our named executive officers to personally invest their own capital in and alongside the funds that we manage. We believe that this strengthens the alignment of interests between our named executive officers and the investors in those investment funds. (See “— Item 13. Certain Relationships and Related Transactions, and Director Independence — Investment in or Alongside Our Funds.”) In determining compensation for our named executive officers, we do not take into account the gains or losses attributable to the personal investments by our named executive officers in our investment funds.
Minimum Retained Ownership Requirements
. We believe the continued ownership by our named executive officers of significant amounts of our equity affords significant alignment of interests with our shareholders. In 2019, in order to further balance retention incentives, we modified our minimum retained ownership requirements for equity awards granted from 2019 and onward to require our named executive officers to hold 25% of their vested equity (other than vested common stock awarded under our Bonus Deferral Plan) for two years after each vesting event, unless the named executive officer’s employment terminates prior to release, in which case the vested equity will be released two years after termination of employment.
The minimum retained ownership requirements for our named executive officers are further described below under “— Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Terms of Blackstone Holdings Partnership Units Granted in 2019 and Prior Years — Minimum Retained Ownership Requirements.”
Named Executive Officers
In 2019, our named executive officers were:
| Executive | Title | |
| Stephen A. Schwarzman | Chairman and Chief Executive Officer | |
| Jonathan D. Gray | President and Chief Operating Officer | |
| Hamilton E. James | Executive Vice Chairman | |
| Michael S. Chae | Chief Financial Officer | |
| John G. Finley | Chief Legal Officer |
Compensation Elements for Named Executive Officers
The key elements of the compensation of our named executive officers for 2019 were base compensation, which is composed of base salary, cash bonus and equity-based compensation, and performance compensation, which is composed of carried interest and incentive fee allocations:
Base Salary
. Each named executive officer received a $350,000 annual base salary in 2019, which equals the total yearly partnership drawings that were received by each of our senior managing directors prior to our initial public offering in 2007. In keeping with historical practice, we continue to pay this amount as a base salary.
Annual Cash Bonus Payments / Deferred Equity Awards
. Since our initial public offering, Mr. Schwarzman has not received any cash compensation other than the $350,000 annual salary described above and the actual realized carried interest distributions or incentive fees he may receive in respect of his participation in the carried interest or incentive fees earned from our funds through our Performance Plans described below. We believe that having Mr. Schwarzman’s compensation largely based on ownership of a portion of the carried interest or incentive fees earned from our funds aligns his interests with those of the investors in our funds and our shareholders.
Each of our named executive officers other than Mr. Schwarzman received annual cash bonus payments in 2019 in addition to their base salary. These cash payments included participation interests in the earnings of the firm’s various investment businesses. Indicative participation interests for each year were disclosed to a named executive officer at the beginning of such year and represented estimates of the expected percentage participation that such named executive officer may have had in the relevant business unit(s)’ earnings for that same year. However, the ultimate cash payments paid to the named executive officers at the end of the year in respect of their participation interests were determined in the discretion of Mr. Schwarzman and Mr. Gray, as described below. Earnings for a business unit are calculated based on the annual operating income of that business unit and are generally a function of the performance of such business unit, which is evaluated by Mr. Schwarzman and Mr. Gray. The ultimate cash payment amounts were based on (a) the prior and anticipated performance of the named executive officer, (b) the prior and anticipated performance of the segments and product lines in which the named executive officer serves and for which he has responsibility, and (c) the estimated participation interests given to the named executive officer at the beginning of the year in respect of the investments to be made in that year. We make annual cash bonus payments in the first quarter of the ensuing year to reward individual performance for the prior year. The ultimate cash payments that are made are fully discretionary as further discussed below under “— Determination of Incentive Compensation.”
For 2019, all employees other than Mr. Schwarzman, Mr. Gray and Mr. James were selected to participate in the Bonus Deferral Plan. The Bonus Deferral Plan provides for the deferral of a portion of each participant’s annual cash bonus payment. The portion deferred is prescribed under the Bonus Deferral Plan and is calculated in accordance with certain adjustments, including reductions for mandatory contributions to our investment funds. By deferring a portion of a participant’s compensation for three years, the Bonus Deferral Plan acts as an employment retention mechanism and thereby enhances the alignment of interests between such participant and the firm. Many publicly traded asset managers utilize deferred compensation plans as a means of retaining and motivating their professionals, and we believe that it is in the interest of our shareholders to do the same for our personnel.
On January 10, 2020, Mr. Chae and Mr. Finley each received a deferral award under the Bonus Deferral Plan of deferred restricted common stock units in respect of their service in 2019. The amount of each participant’s annual cash bonus payment deferred under the Bonus Deferral Plan is calculated pursuant to a deferral rate table using the participant’s total annual incentive compensation, which generally includes such participant’s annual cash bonus payment and a portion of any incentive fees earned in connection with our investment funds and is subject to certain adjustments, including reductions for mandatory contributions to our investment funds. The percentage of Mr. Chae’s 2019 annual cash bonus payment mandatorily deferred into deferred restricted common stock units was approximately 22.3%. The percentage of Mr. Finley’s annual cash bonus payment mandatorily deferred into deferred restricted common stock units was approximately 37.3%. This award is reflected as a stock award for fiscal year 2019 in the Summary Compensation Table and in the Grants of Plan-Based Awards in 2019 table.
Discretionary Equity Awards
. In January 2019, Mr. Gray, Mr. Chae and Mr. Finley were each awarded a discretionary award of deferred restricted Blackstone Holdings Partnership Units with a value of $30,000,000, $2,000,000 and $2,000,000, respectively. These awards reflected 2018 performance and were intended to further promote retention and to incentivize future performance. The awards were granted under the 2007 Equity Incentive Plan on July 1, 2019, subject to the named executive officer’s continued employment through such date. The awards will vest 20% on July 1, 2022, 30% on July 1, 2023 and 50% on July 1, 2024. These awards are reflected as stock awards for fiscal 2019 in the Summary Compensation Table and in the Grants of Plan-Based Awards in 2019 table.
In January 2020, Mr. Gray, Mr. Chae and Mr. Finley were each awarded a discretionary award of deferred restricted common stock units with a value of $35,000,000, $10,000,000 and $5,000,000, respectively. These awards reflected 2019 performance and were intended to further promote retention and to incentivize future performance. The awards will be granted under the 2007 Equity Incentive Plan and are expected to be granted on April 1, 2020, subject to the named executive officer’s continued employment through such date. The awards will vest 10% on July 1, 2021, 10% on July 1, 2022, 20% on July 1, 2023, 30% on July 1, 2024 and 30% on July 1, 2025. These awards will be reflected as stock awards for fiscal 2020 in the Summary Compensation Table and in the Grants of Plan-Based Awards in 2020 table.
Participation in Carried Interest and Incentive Fees
. During 2019, all of our named executive officers participated in the carried interest of our carry funds or the incentive fees of our funds that pay incentive fees through their participation interests in the carry or incentive fee pools generated by these funds. The carry or incentive fee pool with respect to each fund in a given year is funded by a fixed percentage of the total amount of carried interest or incentive fees earned by Blackstone for such fund in that year. We refer to these pools and employee participation therein as our “Performance Plans” and payments made thereunder as “performance payments.” Because the aggregate amount of performance payments payable through our Performance Plans is directly tied to the performance of the funds, we believe this fosters a strong alignment of interests between the investors in those funds and these named executive officers, and therefore benefits our shareholders. In addition, most alternative asset managers, including several of our competitors, use participation in carried interest or incentive fees as a central means of compensating and motivating their professionals, and we must do the same in order to attract and retain the most qualified personnel. For purposes of our financial statements, we treat the income allocated to all our personnel who have participation interests in the carried interest or incentive fees generated by our funds as compensation, and the amounts of carried interest and incentive fees earned by named executive officers are reflected as “All Other Compensation” in the Summary Compensation Table. Distributions in respect of our Performance Plans for each named executive officer are determined on the basis of the percentage participation in the relevant investments previously allocated to that named executive officer, which percentage participations are established in January of each year in respect of the investments to be made in that year. The percentage participation for a named executive officer may vary from year to year and fund to fund due to several factors, and may include changes in the size and composition of the pool of Blackstone personnel participating in such Performance Plan in a given year, the performance of our various businesses, new developments in our businesses and product lines, and the named executive officer’s leadership and oversight of the business or corporate function for which the named executive officer is responsible and such named executive officer’s contributions with respect to our strategic initiatives. In addition, certain of our employees, including our named executive officers, may participate in profit sharing initiatives whereby these individuals may receive allocations of investment income from Blackstone’s firm investments. Our employees, including our named executive officers, may also receive equity awards in our investment advisory clients and/or be allocated securities of such clients that we have received.
(a)
Carried Interest.
Distributions of carried interest in cash (or, in some cases,
in-kind)
to our named executive officers and other employees who participate in our Performance Plans relating to our carry funds depends on the realized proceeds and timing of the cash realizations of the investments owned by the carry funds in which they participate. Our carry fund agreements also set forth specified preconditions to a carried interest distribution, which typically include that there must have been a positive return on the relevant investment and that the fund must be above its carried interest hurdle rate. In addition, as described below, employees or senior managing directors may also be required to have fulfilled specified service requirements in order to be eligible to receive carried interest distributions. For our carry funds, carried interest distributions for the named executive officer’s participation interests are generally made to the named executive officer following the actual realization of the investment, although a portion of such carried interest is held back by the firm in respect of any future “clawback” obligation related to the fund. In allocating participation interests in the carry pools, we have not historically taken into account or based such allocations on any prior or projected triggering of any “clawback” obligation related to
any fund. To the extent any “clawback” obligation were to be triggered, carried interest previously distributed to a named executive officer would have to be returned to the limited partners of such fund, thereby reducing the named executive officer’s overall compensation for any such year. Moreover, because a carried interest recipient (including Blackstone itself) may have to fund more than his or her respective share of a “clawback” obligation under the governing documents (generally, up to an additional 50%), there is the possibility that the compensation paid to a named executive officer for any given year could be significantly reduced or even negative in the event a “clawback” obligation were to arise.
Participation in carried interest generated by our carry funds for all participating named executive officers other than Mr. Schwarzman and Mr. James is subject to vesting. Vesting serves as an employment retention mechanism and thereby enhances the alignment of interests between a participant in our Performance Plans and the firm. For carried interest allocated on or prior to December 31, 2012 and carried interest earned in certain of our credit funds, each participating named executive officer (other than Mr. Schwarzman and Mr. James) vests in 25% of the carried interest related to an investment immediately upon the closing of the investment by a carry fund with the remainder vesting in equal installments on the first through third anniversary of the closing of that investment (unless an investment is realized prior to the expiration of such three-year anniversary, in which case such active executive officer is deemed 100% vested in the proceeds of such realizations). For carried interest allocated after December 31, 2012, the carried interest related to an investment generally vests in equal installments on the first through fourth anniversary of the closing of that investment (unless an investment is realized prior to the expiration of such four-year anniversary, in which case such active executive officer is deemed 100% vested in the proceeds of such realizations). In addition, any named executive officer who is retirement eligible will automatically vest in 50% of their otherwise unvested carried interest allocation upon retirement. (See “—
Non-Competition
and
Non-Solicitation
Agreements — Retirement.”) We believe that vesting of carried interest participation enhances the stability of our senior management team and provides greater incentives for our named executive officers to remain at the firm. Due to his unique status as a founder and the long-time chief executive officer of our firm, Mr. Schwarzman vests in 100% of his carried interest participation related to any investment by a carry fund upon the closing of that investment. In recognition of his significant contributions to the firm and the value Mr. James continues to provide as Executive Vice Chairman, Mr. James fully vests in any carried interest participation related to any investment by a carry fund upon the closing of that investment.
(b)
Incentive Fees.
Cash distributions of incentive fees to our named executive officers and other employees who participate in our Performance Plans relating to the funds that pay incentive fees depends on the performance of the investments owned by those funds in which they participate. For our investment funds that pay incentive fees, those incentive fees are only paid to the firm and employees of the firm to the extent an applicable fund’s portfolio of investments has profitably appreciated in value (in most cases above a specified level) during the applicable period and following the calculation of the profit split (if any) between the fund’s general partner or investment adviser and the fund’s investors, which occurs once a year (generally December 31 or June 30 of each year).
(c)
Investment Advisory Client Interests
. BXMT, Blackstone Residential Trust (“BXRT”) and Blackstone Real Estate Income Trust (“BREIT”) are investment advisory clients of Blackstone. Compensation we receive from investment advisory clients in the form of securities may be allocated to employees and senior managing directors. For example, in 2019, Messrs. Schwarzman, Gray, James, Chae and Finley were allocated restricted shares of listed common stock of BXMT in connection with investment advisory services provided by Blackstone to BXMT. In 2019, Messrs. Schwarzman, Gray, James, Chae and Finley were also allocated restricted shares of BXRT and BREIT. The BREIT shares were allocated in January 2019 in respect of 2018 performance. The value of these allocated restricted shares is reflected as “All Other Compensation” in the Summary Compensation Table.
Other Benefits
. Upon the consummation of our initial public offering in June 2007, we entered into a founding member agreement with our founder, Mr. Schwarzman, which provides specified benefits to him following his retirement. (See “— Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Schwarzman Founding Member Agreement.”) Mr. Schwarzman, Mr. Gray and Mr. James are provided certain security services, which may include home security systems and monitoring, and personal and related security services. These security services are provided for our benefit, and we consider the related
expenses to be appropriate business expenses rather than personal benefits for Mr. Schwarzman, Mr. Gray and Mr. James. Nevertheless, the expenses associated with these security services are reflected in the “All Other Compensation” column of the Summary Compensation Table below. In addition, in 2019, we provided certain unused company-leased office space, and limited administrative support, for use by certain individuals who work for the Education Finance Institute (EFI), a charitable organization formed by Mr. James, for which there was no incremental cost to Blackstone.
Determination of Incentive Compensation
Mr. Schwarzman reserves final approval of each named executive officer’s compensation, other than his own, based on recommendations from Mr. Gray. Mr. Schwarzman’s compensation has been established pursuant to the terms of his amended and restated founding member agreement, which is described below under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Schwarzman Founding Member Agreement”. For 2019, these decisions were based primarily on Mr. Schwarzman’s and Mr. Gray’s assessment of such named executive officer’s individual performance, operational performance for the areas of the business for which he has responsibility, and the officer’s potential to enhance investment returns for the investors in our funds and service to our advisory clients, and to contribute to long-term shareholder value. In evaluating these factors, Mr. Schwarzman and Mr. Gray relied upon their judgment to determine the ultimate amount of a named executive officer’s annual cash bonus payment and participation in carried interest, incentive fees and investment advisory client interests that was necessary to properly induce the named executive officer to seek to achieve our objectives and reward a named executive officer in achieving those objectives over the course of the prior year. Key factors that Mr. Schwarzman considered in making such determination with respect to Mr. Gray were his service as President and Chief Operating Officer, his role in overseeing the growth and operations of the firm, and his leadership on the strategic direction of the firm generally. Key factors that Mr. Schwarzman and Mr. Gray considered in making such determinations with respect to Mr. James were his role in helping develop new businesses, serving as a firm spokesman and managing strategic external relationships. Key factors that Mr. Schwarzman and Mr. Gray considered in making such determinations with respect to Mr. Chae were his leadership and oversight of our global finance, treasury, technology and corporate development function and his role in strategic initiatives undertaken by the firm, including the successful completion of the Conversion. Key factors that Mr. Schwarzman and Mr. Gray considered in making such determinations with respect to Mr. Finley were his leadership and oversight of our global legal and compliance functions, his role in positioning the firm to be compliant with and responsive to evolving legal and regulatory requirements applicable to us and our investment businesses, and his role in strategic initiatives undertaken by the firm, including the successful completion of the Conversion. For 2019, Mr. Schwarzman and Mr. Gray also considered each named executive officer’s prior year annual cash bonus payments, indicative participation interests disclosed to the named executive officer at the beginning of the year, his allocated share of performance interests through participation in our Performance Plans, the appropriate balance between incentives for long-term and short-term performance, and the compensation paid to the named executive officer’s peers within the firm. The actual cash bonus amounts awarded based on these considerations, net of the portion of Mr. Chae’s and Mr. Finley’s bonus mandatorily deferred into deferred restricted common stock units pursuant to the Bonus Deferral Plan, are reflected in the “Bonus” column of the Summary Compensation Table below.
Compensation Committee Report
The compensation committee of the board of directors has reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determined that the Compensation Discussion and Analysis should be included in this annual report.
Stephen A. Schwarzman
Compensation Committee Interlocks and Insider Participation
During 2019, our compensation committee was comprised of Mr. Schwarzman, and none of our executive officers served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served on our compensation committee or our board of directors. For a description of certain transactions between us and Mr. Schwarzman, see “— Item 13. Certain Relationships and Related Transactions, and Director Independence.”
Summary Compensation Table
The following table provides summary information concerning the compensation of our Chief Executive Officer, our Chief Financial Officer and each of our three other most highly compensated employees who served as executive officers at December 31, 2019, for services rendered to us. These individuals are referred to as our named executive officers in this annual report.
| Name and Principal Position | Year | Salary | Bonus (a) | Stock Awards (b) | All Other Compensation (c) | Total | ||||||||||||||||||
| Stephen A. Schwarzman Chairman and Chief Executive Officer | 2019 | $ | 350,000 | $ | — | $ | — | $ | 56,723,953 | $ | 57,073,953 | |||||||||||||
| 2018 | $ | 350,000 | $ | — | $ | — | $ | 68,797,028 | $ | 69,147,028 | ||||||||||||||
| 2017 | $ | 350,000 | $ | — | $ | — | $ | 125,169,429 | $ | 125,519,429 | ||||||||||||||
| Jonathan D. Gray President and Chief Operating Officer | 2019 | $ | 350,000 | $ | 10,000,000 | $ | 33,006,635 | $ | 55,637,598 | $ | 98,994,233 | |||||||||||||
| 2018 | $ | 350,000 | $ | 10,000,000 | $ | — | $ | 47,470,560 | $ | 57,820,560 | ||||||||||||||
| 2017 | $ | 350,000 | $ | 25,797,554 | $ | 6,040,668 | $ | 131,861,776 | $ | 164,049,998 | ||||||||||||||
| Hamilton E. James Executive Vice Chairman | 2019 | $ | 350,000 | $ | 27,347,258 | $ | — | $ | 28,265,429 | $ | 55,962,687 | |||||||||||||
| 2018 | $ | 350,000 | $ | 28,785,507 | $ | — | $ | 37,108,062 | $ | 66,243,569 | ||||||||||||||
| 2017 | $ | 350,000 | $ | 45,978,814 | $ | — | $ | 61,426,748 | $ | 107,755,562 | ||||||||||||||
| Michael S. Chae Chief Financial Officer | 2019 | $ | 350,000 | $ | 5,713,868 | $ | 3,960,195 | $ | 5,556,311 | $ | 15,580,374 | |||||||||||||
| 2018 | $ | 350,000 | $ | 5,702,045 | $ | 1,398,751 | $ | 6,865,619 | $ | 14,316,416 | ||||||||||||||
| 2017 | $ | 350,000 | $ | 6,634,789 | $ | 27,723 | $ | 11,204,987 | $ | 18,217,499 | ||||||||||||||
| John G. Finley Chief Legal Officer | 2019 | $ | 350,000 | $ | 3,691,801 | $ | 4,564,697 | $ | 1,383,733 | $ | 9,990,231 | |||||||||||||
| 2018 | $ | 350,000 | $ | 3,584,415 | $ | 2,143,429 | $ | 1,627,559 | $ | 7,705,403 | ||||||||||||||
| 2017 | $ | 350,000 | $ | 3,787,940 | $ | 1,578,479 | $ | 2,295,742 | $ | 8,012,161 |
| (a) | The amounts reported in this column reflect the annual cash bonus payments made for performance in the indicated year. |
|---|
The amount reported as “bonus” for 2019 for Mr. Chae and Mr. Finley is shown net of their mandatory deferral pursuant to the Bonus Deferral Plan. The deferred amounts for 2019 were as follows: Mr. Chae, $1,636,132 and Mr. Finley, $2,198,199. For additional information on the Bonus Deferral Plan, see “— Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Terms of Deferred Restricted Common Stock Units Granted Under the Bonus Deferral Plan in 2020 and Prior Years.”
| (b) | The reference to “stock” in this table refers to deferred restricted Blackstone Holdings Partnership Units or deferred restricted common stock units. The amounts reported in this column represent the grant date fair value of stock awards granted for financial statement reporting purposes in accordance with GAAP pertaining to equity-based compensation. The assumptions used in determining the grant date fair value are set forth in Note 17. “Equity-Based Compensation” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data.” |
|---|
Amounts reported for 2019 reflect the following deferred restricted common stock units granted on January 10, 2020 for 2019 performance under the Bonus Deferral Plan: Mr. Chae, 30,487 deferred restricted common stock units with a grant date fair value of $1,759,710 and Mr. Finley, 40,960 deferred restricted common stock units with a grant date fair value of $2,364,211. The grant date fair value of the stock award reflecting the deferred bonus amount is computed in accordance with GAAP and generally differs from the dollar amount of the portion of the bonus that is required to be deferred under the Bonus Deferral Plan. For additional information on the Bonus Deferral Plan, see “— Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Terms of Deferred Restricted Common Stock Units Granted Under the Bonus Deferral Plan in 2020 and Prior Years.”
| (c) | Amounts reported for 2019 include distributions, whether in cash or in-kind, in respect of carried interest or incentive fee allocations relating to our Performance Plans to the named executive officer in 2019 as follows: $53,486,800 for Mr. Schwarzman, $52,790,654 for Mr. Gray, $27,169,243 for Mr. James, $5,358,441 for Mr. Chae and $1,303,840 for Mr. Finley, respectively. Any in-kind distributions in respect of carried interest are reported based on the market value of the securities distributed as of the date of distribution. For 2019, Messrs. Schwarzman, Gray, James and Chae were the only named executive officers who received such in-kind distributions. We have determined to present compensation relating to carried interest and incentive fees within the Summary Compensation Table in the year in which such compensation is paid to the named executive officer under the terms of the relevant Performance Plan. Accordingly, the amounts presented in the table differ from the compensation expense recorded by us on an accrual basis for such year in respect of carried interest and incentive fees allocable to a named executive officer, which accrued amounts for 2019 are separately disclosed in this footnote to the Summary Compensation Table. We believe that the presentation of the actual amounts of carried interest- and incentive fee-related compensation paid to a named executive officer during the year, instead of the amounts of compensation expense we have recorded on an accrual basis, most appropriately reflects the actual compensation received by the named executive officer and represents the amount most directly aligned with the named executive officer’s actual performance. By contrast, the amount of compensation expense accrued in respect of carried interest and incentive fees allocable to a named executive officer can be highly volatile from year to year, with amounts accrued in one year being reversed in a following year, and vice versa, causing such amounts to be less useful as a measure of the compensation actually earned by a named executive officer in any particular year. |
|---|
To the extent compensation expense recorded by us on an accrual basis in respect of carried interest or incentive fee allocations (rather than cash or
in-kind
distributions) were to be included for 2019, the amounts would be $111,281,155 for Mr. Schwarzman, $111,002,224 for Mr. Gray, $54,767,757 for Mr. James, $8,180,502 for Mr. Chae and $2,893,233 for Mr. Finley. For financial statement reporting purposes, the accrual of compensation expense is equal to the amount of carried interest and incentive fees related to performance fee revenues as of the last day of the relevant period as if the performance fee revenues in the funds generating such carried interest or incentive fees were realized as of the last day of the relevant period.
With respect to Messrs. Schwarzman, Gray, James, Chae and Finley, amounts shown for 2019 also include the value of restricted shares of listed common stock of BXMT allocated to such named executive officers based on the closing price of BXMT’s common stock on the date of the award as follows: $1,204,931 for Mr. Schwarzman, $809,244 for Mr. Gray, $314,458 for Mr. James, $87,615 for Mr. Chae and $35,046 for Mr. Finley. These restricted shares will vest over three years with
one-sixth
of the shares vesting at the end of the second quarter after the date of the award and the remaining shares vesting in ten equal quarterly installments thereafter. In addition, with respect to Messrs. Schwarzman, Gray, James, Chae and Finley, amounts shown for 2019 include the value of restricted shares of BXRT stock allocated to such executive officers based on the date of the award as follows: $83,436 for Mr. Schwarzman, $66,272 for Mr. Gray, $25,746 for Mr. James, $7,173 for Mr. Chae and $2,865 for Mr. Finley. These restricted shares will vest
one-third
on January 1, 2020,
one-third
on January 1, 2021 and
one-third
on January 1, 2022. In addition, with respect to Messrs. Schwarzman, Gray, James, Chae and Finley, amounts shown for 2019 also include the value of BREIT shares allocated to such named executive officers based on BREIT’s 2018
year-end
net asset value as follows: $1,572,083 for Mr. Schwarzman, $1,970,977 for Mr. Gray, $749,682 for Mr. James, $103,081 for Mr. Chae and $41,232 for Mr. Finley. These BREIT shares are fully vested upon delivery.
With the exception of $376,703 of expenses related to security services in 2019 for Mr. Schwarzman and members of his family, any perquisites or other personal benefits provided to the other named executive officers were less than $10,000 and information regarding any such perquisites or other personal benefits has therefore not been included. As noted above under “— Compensation Discussion and Analysis — Compensation Elements for Named Executive Officers — Other Benefits,” we consider the expenses for security services for Mr. Schwarzman to be for our benefit and appropriate business expenses rather than personal benefits for Mr. Schwarzman. Mr. Schwarzman makes business and personal use of a car and driver and he and members of his family also make occasional business and personal use of an airplane in which we have a fractional interest and in each case he bears the full cost of such personal usage. In addition, certain Blackstone personnel administer personal matters for Mr. Schwarzman and certain matters for the Stephen A. Schwarzman Education Foundation (“SASEF”) and the Stephen A. Schwarzman Foundation (“SASF”), and Mr. Schwarzman, SASEF and SASF, as applicable, respectively, bear the full incremental cost to us of such personnel. Mr. James and members of his family make occasional business and personal use of an airplane in which we have a fractional interest and he bears the full incremental cost of such personal usage. There is no incremental expense incurred by us in connection with the use of any car and driver, airplane or personnel by Messrs. Schwarzman or James, as described above.
Grants of Plan-Based Awards in 2019
The following table provides information concerning equity awards granted in 2019 or, for deferred restricted common stock units granted under the Bonus Deferral Plan, with respect to 2019, to our named executive officers:
| Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (a) | Grant Date Fair Value of Stock and Option Awards (a) | ||||||||||
| Stephen A. Schwarzman | — | — | $ | — | |||||||||
| Jonathan D. Gray | 7/1/2019 | 708,601 | (c) | $ | 33,006,635 | ||||||||
| Hamilton E. James | — | — | $ | — | |||||||||
| Michael S. Chae | 7/1/2019 | 47,241 | (c) | $ | 2,200,486 | ||||||||
| 1/10/2020 | 30,487 | (b) | $ | 1,759,710 | |||||||||
| John G. Finley | 7/1/2019 | 47,241 | (c) | $ | 2,200,486 | ||||||||
| 1/10/2020 | 40,960 | (b) | $ | 2,364,211 |
| (a) | The references to “stock” or “shares” in this table refer to deferred restricted Blackstone Holdings Partnership Units or our deferred restricted common stock units. |
|---|
| (b) | Represents deferred restricted common stock units granted in 2020 under the Bonus Deferral Plan for 2019 performance. These grants are reflected in the “Stock Awards” column of the Summary Compensation Table in 2019. |
|---|
| (c) | Represents deferred restricted Blackstone Holdings Partnership Units granted under our 2007 Equity Incentive Plan and reflects 2018 performance. |
|---|
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019
Terms of Blackstone Holdings Partnership Units Granted in 2019 and Prior Years
Our
pre-IPO
owners, including our named executive officers, received Blackstone Holdings Partnership Units in the reorganization in exchange for the contribution of their equity interests in our operating subsidiaries to Blackstone Holdings and in exchange for their interests in carried interest relating to investments made by our carry funds prior to the date of the contribution. Subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, these partnership units may be exchanged for shares of our Class A common stock as described under “— Item 13. Certain Relationships and Related Transactions, and Director Independence — Exchange Agreement” below.
Vesting Provisions
. The 176,685 deferred restricted Blackstone Holdings Partnership Units granted in 2015 to Mr. Finley vested 20% on July 1, 2018 and 30% on July 1, 2019, and the remaining 50% will vest on July 1, 2020.
The 981,883 deferred restricted Blackstone Holdings Partnership Units granted to Mr. Chae in 2016 vest annually in substantially equal installments over six years beginning on July 1, 2019. The 708,601, 47,241 and 47,241 deferred restricted Blackstone Holdings Partnership Units granted in 2019 to Mr. Gray, Mr. Chae and Mr. Finley, respectively, will vest 20% on July 1, 2022, 30% on July 1, 2023 and 50% on July 1, 2024.
Except as described below, unvested deferred restricted Blackstone Holdings Partnership Units are generally forfeited upon termination of employment. With respect to Mr. Gray, the deferred restricted Blackstone Holdings Partnership Units granted to him in 2019 will become fully vested if he is terminated by us without cause. In addition, upon the death or permanent disability of a named executive officer, all of his or her unvested deferred restricted Blackstone Holdings Partnership Units held at that time will vest immediately. In connection with a named executive officer’s termination of employment due to qualifying retirement, with respect to unvested deferred restricted Blackstone Holdings Partnership Units granted in 2015 and subsequent years, 50% of such units will continue to vest and be delivered over the vesting period, subject to forfeiture if the named executive officer violates any applicable provision of his employment agreement or engages in any competitive activity (as such term is defined in the applicable award agreement). (See
“Non-Competition
and
Non-Solicitation
Agreements — Retirement.”) Further, in the event of a change in control (defined in the Blackstone Holdings partnership agreements as the occurrence of any person, other than Blackstone Group Management L.L.C. or a person approved by Blackstone Group Management L.L.C., becoming the Class C Shareholder), any Blackstone Holdings Partnership Units and deferred restricted Blackstone Holdings Partnership Units will automatically be deemed vested as of immediately prior to such change in control.
All vested and unvested Blackstone Holdings Partnership Units and deferred restricted Blackstone Holdings Partnership Units (and our Class A common stock received in exchange for such Blackstone Holdings Partnership Units) held by a named executive officer will be immediately forfeited in the event the named executive officer materially breaches any of their restrictive covenants set forth in the
non-competition
and
non-solicitation
agreement outlined under
“Non-Competition
and
Non-Solicitation
Agreements” or their service is terminated for cause. Notwithstanding the foregoing, Mr. Schwarzman will not be required to forfeit more than 25% of the units held by him as of March 1, 2018, the date of his amended and restated founding member agreement.
Cash Dividend Equivalents.
All unvested Blackstone Holdings Partnership Units and deferred restricted Blackstone Holdings Partnership Units are entitled to the payment of current cash dividend equivalents. In accordance with the SEC’s rules, the current cash dividend equivalents are not required to be reported in the Summary Compensation Table because the amounts of future cash dividends are factored into the grant date fair value of the awards.
Minimum Retained Ownership Requirements
. For units granted in 2014 and prior years, while employed by us and generally for one year following the termination of employment, each of our named executive officers (except as otherwise provided below) will be required to continue to hold (and may not transfer) at least 25% of all vested equity (other than vested common stock awarded under our Bonus Deferral Plan) received by him or her; provided that, with respect to vested equity received in connection with the reorganization we effected prior to our initial public offering, such percentage is reduced to 12.5% upon qualifying retirement. For equity granted from 2015 through 2018 each of our named executive officers (except as otherwise provided below) will be required to hold 25% of their vested equity (other than vested common stock awarded under our Bonus Deferral Plan) until the earlier of (1) ten years after the applicable vesting date and (2) one year following termination of employment. For equity awards granted from 2019 and onward, our named executive officers are required to hold 25% of their vested equity (other than vested common stock awarded under our Bonus Deferral Plan) for two years after each vesting event, unless the named executive officer’s employment terminates prior to release, in which case the vested equity will be released two years after the termination of employment. The requirement that one continue to hold at least 25% of such vested equity is subject to the qualification in Mr. Schwarzman’s case that in no event will he be required to hold equity having a market value greater than $1.5 billion or hold equity following termination of employment. Each of our named executive officers is in compliance with these minimum retained ownership requirements.
Transfer Restrictions
. None of our named executive officers may transfer Blackstone Holdings Partnership Units other than pursuant to transactions or programs approved by us.
This transfer restriction applies to sales, pledges of Blackstone Holdings Partnership Units, grants of options, rights or warrants to purchase Blackstone Holdings Partnership Units or swaps or other arrangements that transfer to another, in whole or in part, any of the economic consequences of ownership of the Blackstone Holdings Partnership Units other than as approved by us. We will generally approve pledges or transfers to personal planning vehicles beneficially owned by the families of our
pre-IPO
owners and charitable gifts, provided that the pledgee, transferee or donee agrees to be subject to the same transfer restrictions (except as specified above with respect to Mr. Schwarzman). Transfers to Blackstone are also exempt from the transfer restrictions.
The transfer restrictions set forth above will continue to apply generally for one year following the termination of employment of a named executive officer other than Mr. Schwarzman for any reason, except that the transfer restrictions set forth above will lapse upon death or permanent disability. The transfer restrictions will lapse in the event of a change in control (as defined above).
The Blackstone Holdings Partnership Units received by other Blackstone personnel in the reorganization and pursuant to the 2007 Equity Incentive Plan are also generally subject to the vesting and minimum retained ownership requirements and transfer restrictions applicable to our named executive officers other than Mr. Schwarzman, although
non-senior
managing directors were also generally subject to vesting in respect of a portion of the Blackstone Holdings Partnership Units received by such personnel in the reorganization in exchange for their interests in carried interest.
Terms of Deferred Restricted Common Stock Units Granted Under the Bonus Deferral Plan in 2020 and Prior Years
In 2007, we established our Bonus Deferral Plan for certain eligible employees of Blackstone and certain of our affiliates in order to provide such eligible employees with a
pre-tax
deferred incentive compensation opportunity and to enhance the alignment of interests between such eligible employees and Blackstone and our affiliates. The Bonus Deferral Plan is an unfunded, nonqualified Bonus Deferral Plan which provides for the automatic, mandatory deferral of a portion of each participant’s annual cash bonus payment.
At the end of each year, the Plan Administrator (as defined in the Bonus Deferral Plan) selects plan participants in its sole discretion and notifies such individuals that they have been selected to participate in the Bonus Deferral Plan for such year. Participation is mandatory for those employees selected by the Plan Administrator to be participants. An individual, if selected, may not decline to participate in the Bonus Deferral Plan and an individual who is not so selected may not elect to participate in the Bonus Deferral Plan. The selection of participants is made on an annual basis; an individual selected to participate in the Bonus Deferral Plan for a given year may not necessarily be selected to participate in a subsequent year. For 2019, all employees other than Mr. Schwarzman, Mr. Gray and Mr. James were selected to participate in the Bonus Deferral Plan, with the deferred amount (if any) determined in accordance with the table described below. For 2019, Mr. Chae and Mr. Finley participated in the Bonus Deferral Plan for 2018.
In respect of the deferred portion of his or her annual cash bonus payment, each participant receives deferral units which represent rights to receive in the future a specified amount of common stock units or other equity-based awards under our 2007 Equity Incentive Plan, subject to vesting provisions described below. The amount of each participant’s annual cash bonus payment deferred under the Bonus Deferral Plan is calculated pursuant to a deferral rate table using the participant’s total annual incentive compensation, which generally includes such participant’s annual cash bonus payment and a portion of any incentive fees earned in connection with our investment funds, and is subject to certain adjustments, including reductions for mandatory contributions to our investment funds. For deferrals of 2019 annual cash bonus payments, the deferral percentage was calculated on the basis set forth in the following table (or such other table that may be adopted by the Plan Administrator).
| Portion of Annual Incentive | Marginal Deferral Rate Applicable to Such Portion | Effective Deferral Rate for Entire Annual Bonus (a) | ||||||
| $0 - 100,000 | 0% | 0.0% | ||||||
| $100,001 - 200,000 | 15% | 7.5% | ||||||
| $200,001 - 500,000 | 20% | 15.0% | ||||||
| $500,001 - 750,000 | 30% | 20.0% | ||||||
| $750,001 - 1,250,000 | 40% | 28.0% | ||||||
| $1,250,001 - 2,000,000 | 45% | 34.4% | ||||||
| $2,000,001 - 3,000,000 | 50% | 39.6% | ||||||
| $3,000,001 - 4,000,000 | 55% | 43.4% | ||||||
| $4,000,001 - 5,000,000 | 60% | 46.8% | ||||||
| $5,000,000 + | 65% | 52.8% |
| (a) | Effective deferral rates are shown for illustrative purposes only and are based on an annual cash payment equal to the maximum amount in the range shown in the far left column (which is assumed to be $7,500,000 for the last range shown). |
|---|
Mandatory Deferral Awards
. Generally, deferral units are satisfied by delivery of shares of our Class A common stock in equal annual installments over a three year deferral period. Delivery of shares of our Class A common stock underlying vested deferral units is delayed until anticipated trading window periods to better facilitate the participant’s liquidity to meet tax obligations. If the participant’s employment is terminated for cause, the participant’s undelivered deferral units (vested and unvested) will be immediately forfeited. Upon a change in control or termination of the participant’s employment because of death, any undelivered deferral units (vested and unvested) will become immediately deliverable. Unvested bonus deferral awards will be forfeited upon resignation, will immediately vest and be delivered if the participant’s employment is terminated without cause or because of disability and, in connection with a qualifying retirement, will continue to vest and be delivered over the applicable deferral period, subject to forfeiture if the participant violates any applicable provision of his or her employment agreement or engages in any competitive activity (as such term is defined in the Bonus Deferral Plan).
The 276,309, 20,767 and 50,811 deferred restricted common stock units granted under the Bonus Deferral Plan to Mr. Gray, Mr. Chae and Mr. Finley, respectively, in 2017 for 2016 performance vested 33.3% on January 1, 2018, 33.3% on January 1, 2019 and 33.4% on January 1, 2020. The 172,788, 793 and 45,151 deferred restricted common stock units granted under the Bonus Deferral Plan to Mr. Gray, Mr. Chae and Mr. Finley, respectively, in 2018 for 2017 performance vested 33.3% on January 1, 2019 and 33.3% on January 1, 2020, and vest 33.4% on January 1, 2021. The 43,752 and 67,045 deferred restricted common stock units granted under the Bonus Deferral Plan to Mr. Chae and Mr. Finley, respectively, in 2019 for 2018 performance vested 33.3% on January 1, 2020 and vest 33.3% on January 1, 2021 and 33.4% on January 1, 2022. The 30,487 and 40,960 deferred restricted common stock granted to Mr. Chae and Mr. Finley, respectively, in 2020 for 2019 performance vest 33.3% on January 1, 2021, 33.3% on January 1, 2022 and 33.4% on January 1, 2022.
Schwarzman Founding Member Agreement
Upon the consummation of our initial public offering, we entered into a founding member agreement with Mr. Schwarzman. On March 1, 2018, we amended and restated this agreement, with the approval of the conflicts committee advised by independent counsel, to address certain retirement benefits to be received by Mr. Schwarzman. Mr. Schwarzman’s agreement provides that he will remain our Chairman and Chief Executive Officer (or, as determined by Mr. Schwarzman, our Chairman or Executive Chairman) while continuing service with us and requires him to give us six months’ prior written notice of intent to terminate service with us. The agreement provides that following retirement (or, if applicable, the date on which he ceases active service as a result of his permanent disability), Mr. Schwarzman will be provided with specified retirement benefits for the remainder of his life, including that he be permitted to retain his then current office and continue to be provided with administrative support, access to office services and a car and driver. Mr. Schwarzman will also continue to receive
health benefits following his retirement until his death, subject to his continuing payment of the related health insurance premiums consistent with current policies. Finally, Mr. Schwarzman will also receive reimbursement for travel costs (including travel on personal aircraft) for Blackstone related business functions, annual home and personal security benefits, reasonable access to our Chief Legal Officer, reasonable access to certain events, legal representation for Blackstone related matters, and, subject to his continuing payment of costs and expenses related thereto, he will continue to be provided with offices, technology and support for his family office team at levels consistent with current practice.
The agreement provides that, following Mr. Schwarzman’s termination of service, he or related entities will remain entitled to receive awards of carried interest at reduced levels until the later of February 14, 2027 or the date of Mr. Schwarzman’s death. The profit sharing percentage for any carried interest awarded in new funds launched after Mr. Schwarzman’s termination of service shall generally be set at 50% of the profit sharing percentage Mr. Schwarzman held in the most recent corresponding predecessor fund prior to his termination of employment or, in the case of new funds without a corresponding predecessor fund prior to Mr. Schwarzman’s termination of service, a profit sharing percentage set at 50% of the median of the aggregate profit sharing percentages held by Mr. Schwarzman at the time of his termination of service.
While currently Mr. Schwarzman is entitled to invest in or alongside our investment funds without being subject to management fees or carried interest, this has been extended to continue until ten years following the date of Mr. Schwarzman’s death as to Mr. Schwarzman, his estate and related entities.
On July 1, 2019, in connection with the Conversion and with the approval of the conflicts committee advised by independent counsel, we amended this agreement to address the ongoing compensation to be received by Mr. Schwarzman. Pursuant to the amended agreement, Mr. Schwarzman is entitled to distributions and benefits in amounts and at levels that are consistent with current practices. In addition, the amended agreement provides that, prior to Mr. Schwarzman’s termination of service, the profit sharing percentage for any carried interest in new funds in which there is a corresponding predecessor fund shall be set at the same profit sharing percentage he or related entities held in the most recent such predecessor fund and, in the case where there is no such predecessor fund, the profit sharing percentage shall be set at the median profit sharing percentage owned by him or related entities across all funds existing at the time in question. In connection with the amended agreement, Mr. Schwarzman informed the former conflicts committee of our board of directors that he has no current plan to retire.
Senior Managing Director Agreements
Upon the consummation of our initial public offering, we entered into substantially similar senior managing director agreements with each of our named executive officers and other senior managing directors employed at the firm at that time, other than our founder. Senior managing directors who have joined the firm after our initial public offering (including Mr. Finley) have also entered into senior managing director agreements. The agreements generally provide that each senior managing director will devote substantially all of his or her business time, skill, energies and attention to us in a diligent manner. Each senior managing director will be paid distributions and benefits in amounts determined by Blackstone from time to time in its sole discretion. The agreements require us to provide the senior managing director with 90 days’ prior written notice prior to terminating his or her service with us (other than a termination for cause). Additionally, the agreements require each senior managing director to give us 90 days’ prior written notice of intent to terminate service with us and require the senior managing director to be placed on a
90-day
period of “garden leave” following the senior managing director’s termination of service (as further described under the caption “—
Non-Competition
and
Non-Solicitation
Agreements” below).
Outstanding Equity Awards at 2019 Fiscal Year End
The following table provides information regarding outstanding unvested equity awards made to our named executive officers as of December 31, 2019.
| Stock Awards (a) | |||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (b) | |||||||
| Stephen A. Schwarzman | — | $ | — | ||||||
| Jonathan D. Gray | 915,896 | $ | 51,235,222 | ||||||
| Hamilton E. James | — | $ | — | ||||||
| Michael Chae | 947,166 | $ | 53,038,733 | ||||||
| John G. Finley (c) | 292,029 | $ | 16,409,011 |
| (a) | The references to “stock” or “shares” in this table refer to unvested deferred restricted Blackstone Holdings Partnership Units and unvested deferred restricted common stock units granted under the Bonus Deferral Plan (including deferred restricted common stock units granted to Messrs. Chae and Finley in 2020 in respect of 2019 performance). The vesting terms of these awards are described under the captions “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Terms of Blackstone Holdings Partnership Units Granted in 2019 and Prior Years” above. |
|---|
| (b) | The dollar amounts shown under this column were calculated by multiplying the number of unvested deferred restricted Blackstone Holdings Partnership Units or unvested deferred restricted common stock units held by the named executive officer by the closing market price of $55.94 per share of our Class A common stock on December 31, 2019, the last trading day of 2019, other than the deferred restricted common stock units granted in 2020 in respect of 2019 performance, which are valued as of the date of their grant. |
|---|
| (c) | Amounts reported for Mr. Finley include (1) 68,494 deferred restricted Blackstone Holdings Partnership Units, which reflects 50% of the unvested deferred restricted Blackstone Holdings Partnership Units that have been granted to Mr. Finley and (2) 155,042 deferred restricted common stock units granted pursuant to the Bonus Deferral Plan, which are considered vested and undelivered for financial statement reporting purposes in accordance with GAAP pertaining to equity-based compensation due to Mr. Finley’s retirement eligibility. Upon retirement the deferred restricted Blackstone Holdings Partnership Units are scheduled to vest and be delivered over the vesting period and the deferred restricted common stock units are scheduled to be delivered in equal annual installments over the three year deferral period, in each case subject to forfeiture if the named executive officer violates any applicable provision of his employment agreement or engages in any competitive activity (as such term is defined in the applicable award agreement or the Bonus Deferral Plan, as applicable). |
|---|
Option Exercises and Stock Vested in 2019
The following table provides information regarding the number of outstanding initially unvested equity awards made to our named executive officers that vested during 2019:
| Stock Awards (a) | |||||||||
| Name | Number of Shares Acquired on Vesting | Value Realized on Vesting (b) | |||||||
| Stephen A. Schwarzman | — | $ | — | ||||||
| Jonathan D. Gray | 165,304 | $ | 4,927,712 | ||||||
| Hamilton E. James | — | $ | — | ||||||
| Michael S. Chae | 170,834 | $ | 7,836,922 | ||||||
| John G. Finley | 115,078 | $ | 4,598,187 |
| (a) | The references to “stock” or “shares” in this table refer to deferred restricted Blackstone Holdings Partnership Units and our deferred restricted common stock units. |
|---|
| (b) | The value realized on vesting is based on the closing market prices of our Class A common stock on the day of vesting. |
|---|
Potential Payments Upon Termination of Employment or Change in Control
Upon a change of control event where any person, other than Blackstone Group Management L.L.C. or a person approved by Blackstone Group Management L.L.C., becomes the Class C Shareholder or a termination of employment because of death or disability, any unvested deferred restricted Blackstone Holdings Partnership Units or unvested deferred restricted common stock units held by any of our named executive officers will automatically be deemed vested as of immediately prior to such occurrence of such change of control or such termination of employment. Had such a change of control or such a termination of employment occurred on December 31, 2019, the last business day of 2019, each of our named executive officers would have vested in the following numbers of deferred restricted Blackstone Holdings Partnership Units and deferred restricted common stock units, having the following values based on our closing market price of $55.94 per share of Class A common stock on December 31, 2019, other than the deferred restricted common stock units granted to Mr. Chae and Mr. Finley in 2020 in respect of 2019 performance, which are valued as of the date of their grant: Messrs. Schwarzman and James had no outstanding unvested equity at December 31, 2019; Mr. Gray — 708,601 deferred restricted Blackstone Holdings Partnership Units and 207,295 deferred restricted common stock units with an aggregate value of $51,235,222, Mr. Chae — 865,477 deferred restricted Blackstone Holdings Partnership Units and 81,689 deferred restricted common stock units with an aggregate value of $53,038,733, and Mr. Finley – 136,987 deferred restricted Blackstone Holdings Partnership Units and 155,042 deferred restricted common stock units with an aggregate value of $16,409,011. In addition, the Bonus Deferral Plan provides that upon a change in control or termination of the participant’s employment because of death, any fully vested but undelivered deferred restricted common stock units will become immediately deliverable.
In connection with a named executive officer’s termination of employment due to qualifying retirement, 50% of the unvested deferred restricted Blackstone Holdings Partnership Units will continue to vest and be delivered over the vesting period and any unvested deferred restricted common stock units will vest and be delivered in equal annual installments over the three year deferral period, in each case subject to forfeiture if the named executive officer violates any applicable provision of his employment agreement or engages in any competitive activity (as such term is defined in the applicable award agreement or the Bonus Deferral Plan, as applicable). (See
“Non-Competition
and
Non-Solicitation
Agreements — Retirement.”) As of December 31, 2019, Mr. James and Mr. Finley were retirement eligible. Mr. James had no outstanding unvested equity at December 31, 2019. If Mr. Finley had retired on December 31, 2019, 68,494 of his deferred restricted Blackstone Holdings Partnership Units would continue to vest and be delivered over the vesting period and all 155,042 of his deferred restricted common stock units would vest and be delivered in equal annual installments over the three year deferral period, in each case subject to forfeiture if the named executive officer violates any applicable provision of his employment agreement or engages in any competitive activity (as such term is defined in the applicable award agreement or the Bonus Deferral Plan, as applicable).
Upon a termination of Mr. Gray’s, Mr. Chae’s and Mr. Finley’s employment without cause, the deferred restricted common stock units granted to them under the Bonus Deferral Plan in respect of 2019, 2018 and 2017, as applicable, will become fully vested. Had such a termination of employment occurred on December 31, 2019, the last business day of 2019, each of Mr. Gray, Mr. Chae and Mr. Finley would have vested in the following numbers of deferred restricted common stock units, respectively, having the following values based on our closing market price of $55.94 per share of Class A common stock on December 31, 2019, other than the deferred restricted common stock units granted to Mr. Chae and Mr. Finley in 2020 in respect of 2019 performance, which are valued as of the date of their grant: Mr. Gray — 207,295 deferred restricted common stock units with an aggregate value of $11,596,082, Mr. Chae — 81,689 deferred restricted common stock units with a value of $4,623,950 and Mr. Finley – 155,042 deferred restricted common stock units with an aggregate value of $8,745,958.
Upon a termination of Mr. Gray’s employment without cause, the deferred restricted Blackstone Holdings Partnership Units granted to him on July 1, 2019 will become fully vested. Had such a termination occurred on December 31, 2019, the last business day of 2019, Mr. Gray would have vested in 708,601 deferred restricted Blackstone Holdings Partnership units with a value of $39,639,140 based on our closing market price of $55.94 per Blackstone share on December 31, 2019.
In addition, except as described below, unvested carried interest in our carry funds is generally forfeited upon termination of employment. Upon the death or disability of any named executive officer who participates in the carried interest of our carry funds, the named executive officer will be deemed 100% vested in any unvested portion of carried interest in our carry funds. Furthermore, any named executive officer that is retirement eligible will automatically vest in 50% of their otherwise unvested carried interest allocation upon retirement. (See “—
Non-Competition
and
Non-Solicitation
Agreements — Retirement.”).
In addition, pursuant to Mr. Schwarzman’s founding member agreement described above under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2019 — Schwarzman Founding Member Agreement,” following retirement and for the remainder of his life, Mr. Schwarzman will be provided with specified retirement benefits, including a car and driver, retention of his current office, administrative support and annual home and personal security benefits. The value of such retirement benefits is estimated at approximately $2.4 million per year based on 2019 costs. We have not assigned a value to the entitlements of Mr. Schwarzman and his estate and related entities to receive carried interest in new funds or to invest in our investment funds fee free following his termination of service as such value cannot be reasonably estimated. We anticipate that any incremental cost to us with respect to the other personal benefits to which Mr. Schwarzman is entitled following his retirement will be de minimis.
Non-Competition
and
Non-Solicitation
Agreements
Upon the consummation of our initial public offering, we entered into a
non-competition
and
non-solicitation
agreement with our founder, our other senior managing directors, most of our other professional employees and specified senior administrative personnel to whom we refer collectively as “Contracting Employees.” Contracting Employees who have joined the firm after our initial public offering have also executed
non-competition
and
non-solicitation
agreements. The following are descriptions of the material terms of each such
non-competition
and
non-solicitation
agreement. With the exception of the few differences noted in the description below, the terms of each
non-competition
and
non-solicitation
agreement are generally in relevant part similar.
Full-Time Commitment
. Each Contracting Employee agrees to devote substantially all of his or her business time, skill, energies and attention to his or her responsibilities at Blackstone in a diligent manner. Our founder Mr. Schwarzman has agreed that our business will be his principal business pursuit and that he will devote such time and attention to the business of the firm as may be reasonably requested by us.
Confidentiality
. Each Contracting Employee is required, whether during or after his or her employment with us, to protect and use “confidential information” in accordance with strict restrictions placed by us on its use and disclosure. (Every employee of ours is subject to similar strict confidentiality obligations imposed by our Code of Conduct applicable to all Blackstone personnel.)
Notice of Termination
. Each Contracting Employee is required to give us prior written notice of his or her intention to leave our employ — six months in the case of Mr. Schwarzman, 90 days for all of our other senior managing directors and between 30 and 60 days in the case of all other Contracting Employees.
Garden Leave
. Upon his or her voluntary departure from our firm, a Contracting Employee is required to take a prescribed period of “garden leave.” The period of garden leave is 90 days for our
non-founding
senior managing directors and between 30 and 60 days for all other Contracting Employees. During this period the Contracting Employee will continue to receive some of his or her Blackstone compensation and benefits, but is prohibited from commencing employment with a new employer until the garden leave period has expired. The period of garden leave for each Contracting Employee will run coterminously with the
non-competition
Restricted Period that applies to him or her as described below. Our founder Mr. Schwarzman is subject to
non-competition
covenants but not garden leave requirements.
Non-Competition
. During the term of employment of each Contracting Employee, and during the Restricted Period (as such term is defined below) immediately thereafter, he or she will not, directly or indirectly:
| • | engage in any business activity in which we operate, including any competitive business, |
|---|
| • | render any services to any competitive business, or |
|---|
| • | acquire a financial interest in or become actively involved with any competitive business (other than as a passive investor holding minimal percentages of the stock of public companies). |
|---|
“Competitive business” means any business that competes, during the term of employment through the date of termination, with our business, including any businesses that we are actively considering conducting at the time of the Contracting Employee’s termination of employment, so long as he or she knows or reasonably should have known about such plans, in any geographical or market area where we or our affiliates provide our products or services.
Non-Solicitation
. During the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, he or she will not, directly or indirectly, in any manner solicit any of our employees to leave their employment with us, or hire any such employee who was employed by us as of the date of his or her termination or who left employment with us within one year prior to or after the date of his or her termination. Additionally, each Contracting Employee may not solicit or encourage to cease to work with us any consultant or senior advisers that he or she knows or should know is under contract with us.
In addition, during the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, he or she will not, directly or indirectly, in any manner solicit the business of any client or prospective client of ours with whom he or she, employees reporting to him or her, or anyone whom he or she had direct or indirect responsibility over had personal contact or dealings on our behalf during the three-year period immediately preceding his or her termination. Contracting Employees who are employed in our asset management businesses are subject to a similar
non-solicitation
covenant with respect to investors and prospective investors in our investment funds.
Non-Interference and Non-Disparagement
. During the term of employment of each Contracting Employee, and during the Restricted Period immediately thereafter, he or she may not interfere with business relationships between us and any of our clients, customers, suppliers or partners. Each Contracting Employee is also prohibited from disparaging us in any way.
Restricted Period
. For purposes of the foregoing covenants, the “Restricted Period” will be:
| Covenant | Stephen A. Schwarzman | Other Senior Managing Directors | Other Contracting Employees | |||
| Non-competition | Two years after termination of employment. | One year after termination of employment (which may be extended to 18 months in Blackstone’s sole discretion). | Between 90 days and nine months after termination of employment. | |||
| Non-solicitation of Blackstone employees | Two years after termination of employment. | Two years after termination of employment. | Generally one year after termination of employment. | |||
| Non-solicitation of Blackstone clients or investors | Two years after termination of employment. | One year after termination of employment (which may be extended to 18 months in Blackstone’s sole discretion). | Generally between six months and one year after termination of employment. | |||
| Non-interference with business relationships | Two years after termination of employment. | One year after termination of employment (which may be extended to 18 months in Blackstone’s sole discretion). | Generally between six months and one year after termination of employment. |
For individuals (other than Mr. Schwarzman) who became senior managing directors prior to January 1, 2018, the Restricted Period for the
non-competition,
non-solicitation
of Blackstone clients or investors and
non-interference
with business relationships covenants is one year after termination of employment.
Retirement
. Blackstone personnel are eligible to retire if they have satisfied either of the following tests: (a) one has reached the age of 65 and has at least five full years of service with our firm; or (b) generally one has reached the age of 55 and has at least five full years of service with our firm and the sum of his or her age plus years of service with our firm totals at least 65.
Intellectual Property
. Each Contracting Employee is subject to customary intellectual property covenants with respect to works created, invented, designed or developed by him or her that are relevant to or implicated by his or her employment with us.
Specific Performance
. In the case of any breach of the confidentiality,
non-competition,
non-solicitation,
non-interference,
non-disparagement
or intellectual property provisions by a Contracting Employee, the breaching individual agrees that we will be entitled to seek equitable relief in the form of specific performance, restraining orders, injunctions or other equitable remedies.
Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation
S-K,
we are providing the following information regarding the ratio of the annual total compensation for our principal executive officer to the median of the annual total compensation of all our employees (other than our principal executive officer) (the “CEO Pay Ratio”). Our CEO Pay Ratio is a reasonable estimate calculated in a manner consistent with Item 402(u). However, due to the flexibility afforded by Item 402(u) in calculating the CEO Pay Ratio, our CEO Pay Ratio may not be comparable to the CEO pay ratios presented by other companies.
As of December 31, 2019, we employed approximately 2,905 people, including our 157 senior managing directors. We identified our median employee using our global employee population as of December 31, 2019. To identify our median employee, we used annual base salary and bonuses earned in 2019. We believe this consistently applied compensation measure reasonably reflects annual compensation across our employee base. Application of our consistently applied compensation measure identified six employees with the same total annual base salary and cash bonus earned in 2019. We identified our median employee from among these employees by reviewing the components of their annual total compensation and selecting the employee whose title, tenure and compensation characteristics most accurately reflected the compensation of a typical employee. After identifying our median employee, we calculated the median employee’s annual total compensation in accordance with the requirements of the Summary Compensation Table. For 2019, the annual total compensation for Mr. Schwarzman, our principal executive officer, was $57,073,953 and our median employee’s annual total compensation was $215,000. Accordingly, annual total compensation of our principal executive officer was approximately two hundred and sixty five times the annual total compensation of our median employee.
Director Compensation in 2019
No additional remuneration is paid to our employees for service on our board of directors. In 2019, each of our
non-employee
directors received an annual cash retainer of $150,000 and a grant of deferred restricted common stock units equivalent in value to $210,000, with a grant date fair value determined as described in footnote (a) to the first table below. An additional $40,000 annual cash retainer was paid to the Chairman of the Audit Committee during 2019, $30,000 of which was paid in cash and the remainder of which was paid in the form of deferred restricted common stock units equivalent in value to $10,000 and with the same vesting terms as the other deferred restricted common stock units. An additional $50,000 annual cash retainer was paid to Mr. Light in connection with his service on the executive committee of The Blackstone Group International Partners LLP.
The following table provides the director compensation for our directors for 2019:
| Name | Fees Earned or Paid in Cash | Stock Awards (a) (b) | Total | ||||||||||
| Bennett J. Goodman (c) | $ | — | $ | — | $ | — | |||||||
| Kelly A. Ayotte (d) | $ | 94,758 | $ | 209,210 | $ | 303,968 | |||||||
| James W. Breyer | $ | 150,000 | $ | 210,035 | $ | 360,035 | |||||||
| Sir John Hood | $ | 150,000 | $ | 211,524 | $ | 361,524 | |||||||
| Rochelle B. Lazarus | $ | 150,000 | $ | 212,182 | $ | 362,182 | |||||||
| Jay O. Light | $ | 200,000 | $ | 209,022 | $ | 409,022 | |||||||
| The Right Honorable Brian Mulroney | $ | 150,000 | $ | 209,481 | $ | 359,481 | |||||||
| William G. Parrett | $ | 180,000 | $ | 219,930 | $ | 399,930 |
| (a) | The references to “stock” in this table refer to our deferred restricted common stock units. Amounts for 2019 represent the grant date fair value of stock awards granted in the year, computed in accordance with GAAP, pertaining to equity-based compensation. The assumptions used in determining the grant date fair value are set forth in Note 16. “Earnings Per Share and Stockholder’s Equity” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data.” These deferred restricted common stock units vest, and the underlying shares of Blackstone Class A common stock will be delivered, on the first anniversary of the date of the grant, subject to the outside director’s continued service on our board of directors. |
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| (b) | Each of our non-employee directors was granted deferred restricted common stock units upon appointment as a director. In 2019, in connection with the anniversary of his or her initial grant, each of the following directors was granted deferred restricted common stock units: Ms. Lazarus — 4,566 units; Mr. Light — 3,955 units; Mr. Mulroney — 4,651 units; Mr. Parrett — 4,268 units; Mr. Hood — 5,370 units; and Mr. Breyer — 4,564 units. In addition, Ms. Ayotte was granted 5,392 deferred |
|---|
| restricted common stock units upon her appointment as a director in 2019. The amounts of our non-employee directors’ compensation were approved by our board of directors upon the recommendation of our founder following his review of directors’ compensation paid by comparable companies. |
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The following table provides information regarding outstanding unvested equity awards made to our directors as of December 31, 2019:
| Stock Awards (1) | ||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (2) | ||||||
| Kelly A. Ayotte | 5,392 | $ | 301,628 | |||||
| James W. Breyer | 4,564 | $ | 255,310 | |||||
| Sir John Hood | 5,370 | $ | 300,398 | |||||
| Rochelle B. Lazarus | 4,566 | $ | 255,422 | |||||
| Jay O. Light | 3,955 | $ | 221,243 | |||||
| The Right Honorable Brian Mulroney | 4,651 | $ | 260,177 | |||||
| William G. Parrett | 4,268 | $ | 238,752 |
| (1) | The references to “stock” or “shares” in this table refer to our deferred restricted common stock units. |
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| (2) | The dollar amounts shown in this column were calculated by multiplying the number of unvested deferred restricted common stock units held by the director by the closing market price of $55.94 per share of our Class A common stock on December 31, 2019, the last trading day of 2019. |
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| (c) | Mr. Goodman resigned from the board of directors effective January 1, 2020. During 2019, Mr. Goodman served as a senior managing director of the Company and no additional remuneration was paid to him for his service as director. Mr. Goodman’s employee compensation is discussed in “—Item 13. Certain Relationships and Related Transactions, and Director Independence.” |
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| (d) | Ms. Ayotte was appointed to the board of directors on April 11, 2019. Therefore, the amounts reported for Ms. Ayotte reflect the pro-rated portion of her annual cash retainer earned from the date of her appointment. |
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