Item 13. Certain Relationships and Related Transactions, and Director Independence

| --- | --- |

Transactions with Related Persons

Tax Receivable Agreements

We used a portion of the proceeds from the IPO and the sale of

non-voting

common units to Beijing Wonderful Investments to purchase interests in the predecessor businesses from the predecessor owners. In addition, holders of Blackstone Holdings Partnership Units (other than The Blackstone Group Inc.’s wholly owned subsidiaries), subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings partnerships, may up to four times each year

(subject to the terms of the exchange agreement) exchange their Blackstone Holdings Partnership Units for shares of our Class A common stock on a

one-for-one

basis. A Blackstone Holdings limited partner must exchange one partnership unit in each of the Blackstone Holdings partnerships to effect an exchange for a share of Class A common stock. Blackstone Holdings I L.P. and Blackstone Holdings II L.P. have made an election under Section 754 of the Internal Revenue Code effective for each taxable year in which an exchange of partnership units for a share of Class A common stock occurs, which may result in an adjustment to the tax basis of the assets of such Blackstone Holdings Partnerships at the time of an exchange of partnership units. Other Blackstone Holdings Partnerships and certain subsidiary partnerships are expected to make such elections for the 2019 taxable year with the filing of their federal income tax returns for such tax year. The purchase and subsequent exchanges of Blackstone Holdings Partnership Units are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that we would otherwise be required to pay in the future. We have entered into a tax receivable agreement with holders of Blackstone Holdings Partnership Units that provides for the payment by us to such holders of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change in control, as discussed below) as a result of these increases in tax basis and of certain other tax benefits related to our entering into tax receivable agreements, including tax benefits attributable to payments under the tax receivable agreement. Additional tax receivable agreements have been executed, and will continue to be executed, with newly-admitted Blackstone senior managing directors and certain others who acquire Blackstone Holdings Partnership Units. This payment obligation is an obligation of us (and certain of our subsidiaries that are treated as corporations for U.S. federal income tax purposes which we refer to as “the corporate taxpayers”) and not of Blackstone Holdings. The corporate taxpayers expect to benefit from the remaining 15% of cash savings, if any, in income tax that they realize. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing the actual income tax liability of the corporate taxpayers to the amount of such taxes that the corporate taxpayer would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Blackstone Holdings as a result of the exchanges and had the corporate taxpayers not entered into the tax receivable agreement. The term of the tax receivable agreement commenced upon consummation of our IPO and will continue until all such tax benefits have been utilized or expired, unless the corporate taxpayers exercise their right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement.

Assuming no future material changes in the relevant tax law and that the corporate taxpayers earn sufficient taxable income to realize the full tax benefit of the increased amortization of the assets, the expected future payments under the tax receivable agreement (which are taxable to the recipients) in respect of the purchase and exchanges will aggregate $672.9 million over the next 15 years. The

after-tax

net present value of these estimated payments totals $191.2 million assuming a 15% discount rate and using an estimate of timing of the benefit to be received. Future payments under the tax receivable agreement in respect of subsequent exchanges would be in addition to these amounts. The payments under the tax receivable agreement are not conditioned upon continued ownership of Blackstone equity interests by the

pre-IPO

owners and the others mentioned above.

Subsequent to December 31, 2019, payments totaling $73.9 million were made to certain

pre-IPO

owners and others mentioned above in accordance with the tax receivable agreement and related to tax benefits the Partnership received for the 2018 taxable year. Those payments included payments of $8.7 million to Mr. Schwarzman and investment vehicles controlled by relatives of Mr. Schwarzman; $2.4 million to Mr. James and a trust for which Mr. James is the investment trustee and $0.6 million to Mr. Chae.

In addition, the tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, the corporate taxpayers’ (or their successors’) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the benefits arising from the increased tax deductions and tax basis and other similar benefits. Upon a subsequent actual exchange, any additional increase in tax deductions, tax basis and other similar benefits in excess of the amounts assumed at the change in control will also result in payments under the tax receivable agreement.

Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by an exchanging or selling holder of Blackstone Holdings Partnership Units, under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisition transaction will generally accelerate payments under a tax receivable agreement and increase the present value of such payments, and the disposition of assets before an exchange or acquisition transaction will increase the tax liability of a holder of Blackstone Holdings Partnership Units without giving rise to any rights of a holder of Blackstone Holdings Partnership Units to receive payments under any tax receivable agreements.

Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the corporate taxpayers will not be reimbursed for any payments previously made under a tax receivable agreement. As a result, in certain circumstances, payments could be made under a tax receivable agreement in excess of the corporate taxpayers’ cash tax savings.

Registration Rights Agreement

In connection with the restructuring and IPO, we entered into a registration rights agreement with our

pre-IPO

owners, which was subsequently amended in connection with the Conversion, pursuant to which we granted them, their affiliates and certain of their transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act shares of Class A common stock delivered in exchange for Blackstone Holdings Partnership Units or shares of Class A common stock (and other securities convertible into or exchangeable or exercisable for our shares of Class A common stock) otherwise held by them. In addition, newly-admitted Blackstone senior managing directors and certain others who acquire Blackstone Holdings Partnership Units have subsequently become parties to the registration rights agreement. Under the registration rights agreement, we agreed to register the exchange of Blackstone Holdings Partnership Units for shares of Class A common stock by our holders of Blackstone Holdings Partnership Units. In June 2008, we filed a registration statement on Form

S-3

with the Securities and Exchange Commission to cover future issuances from time to time of up to 818,008,105 common units to holders of Blackstone Holdings Partnership Units upon exchange of up to an equal number of such Blackstone Holdings Partnership Units. In addition, our founder, Stephen A. Schwarzman, has the right to request that we register the sale of shares of Class A common stock held by holders of Blackstone Holdings Partnership Units an unlimited number of times and may require us to make available shelf registration statements permitting sales of shares of Class A common stock into the market from time to time over an extended period. In addition, Mr. Schwarzman has the ability to exercise certain piggyback registration rights in respect of shares of Class A common stock held by holders of Blackstone Holdings Partnership Units in connection with registered offerings requested by other registration rights holders or initiated by us.

Tsinghua University Education Foundation

As part of an initiative announced in 2013, Mr. Schwarzman, through the Stephen A. Schwarzman Education Foundation, personally committed $100 million to create and endow a post-graduate scholarship program at Tsinghua University in Beijing, entitled “Schwarzman Scholars,” and fund the construction of a residential and academic building. He is leading a fundraising campaign to raise $600 million to support the “Schwarzman Endowment Fund.” The Tsinghua University Education Foundation (“TUEF”) will hold the Schwarzman Endowment Fund and has agreed to delegate management of the fund to Blackstone. We have agreed that TUEF, and certain entities affiliated with TUEF, will not be required to pay Blackstone a management fee for managing the Schwarzman Endowment Fund and, to the extent Blackstone allocates and invests assets of the Schwarzman Endowment Fund in our funds, which may take the form of funded or unfunded general partner commitments to our investment funds, we anticipate that such investments will be subject to reduced or waived management fees and/or carried interest.

Joseph P. Baratta

On February 25, 2020, Joseph P. Baratta was appointed to our board of directors, effective March 2, 2020. Mr. Baratta joined Blackstone in 1998 and is a Senior Managing Director and Global Head of Private Equity. For 2019, Mr. Baratta received a base salary of $350,000 and an annual cash bonus payment of $8,542,333. The cash payment was based upon the performance of the Private Equity business, including the contribution of all current and past funds within the business dating back to before the IPO. The ultimate cash payment to Mr. Baratta was, however, determined in the discretion of Mr. Schwarzman and Mr. Gray. On January 1, 2020, Mr. Baratta was granted 2,007 shares of deferred restricted common stock with a grant date fair value of $112,272, reflecting the portion of his annual cash bonus payment mandatorily deferred into deferred restricted common stock pursuant to the Deferred Compensation Plan. In January 2019, Mr. Baratta was awarded a discretionary award of 11,811 deferred restricted Blackstone Holdings Partnership Units with a grant date fair value of $550,156. This award reflected 2018 performance and was intended to further promote retention and to incentivize future performance. The award was granted under the 2007 Equity Incentive Plan on July 1, 2019, subject to Mr. Baratta’s continued employment through such date. The award will vest 20% on July 1, 2022, 30% on July 1, 2023 and 50% on July 1, 2024.

Mr. Baratta also participated in the performance fees of our funds, consisting of carried interest in our carry funds and incentive fees in our funds that pay incentive fees. The compensation paid to Mr. Baratta in respect of carried interest in our carry funds primarily relates to Mr. Baratta’s participation in the private equity funds (which were formed both before and after the IPO). The amount of distributions, whether cash or

in-kind,

in respect of carried interest or incentive fee allocations to Mr. Baratta for 2019 was $4,406,042. 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. See “Executive Compensation — Compensation Elements for Named Executive Officers” in this report for additional discussion of the elements of our compensation program.

Bennett J. Goodman

On February 24, 2015, Bennett J. Goodman was appointed to our board of directors. Mr. Goodman joined Blackstone in 2008 and served as a Senior Managing Director and

Co-Founder

of GSO Capital Partners. On August 28, 2019, we entered into a withdrawal agreement and senior advisor agreement with Mr. Goodman. Pursuant to the agreements, Mr. Goodman continued to serve as a director and as a senior managing director of Blackstone until January 1, 2020, at which time he stepped down from the Blackstone board of directors and ceased serving as a senior managing director and became a Senior Advisor to GSO Capital Partners and retained the title of Chairman of Blackstone/GSO Secured Lending Fund.

The senior advisor agreement we entered into with Mr. Goodman has a term of not less than one year and will automatically renew for successive one year terms unless either party provides notice of

non-renewal

at least thirty days prior to the expiration of the then-current term. For 45 days following the termination of Mr. Goodman’s services as a senior advisor, Mr. Goodman has agreed not to invest in or with, serve or provide advice in any capacity to a competitor of GSO, other than limited passive

co-investments.

The senior advisor agreement provides that for so long as Mr. Goodman serves as a senior advisor to GSO, he will receive an annual retainer of $250,000 and incentive fees or carried interest allocations of five points in GSO’s U.S. direct lending strategies. The senior advisor agreement also provides that with respect to the 957,804 outstanding deferred stock restricted Blackstone Holdings Partnership Units that would have otherwise been forfeited in connection with his termination of employment, such units will remain outstanding and 150,000 will vest on each anniversary of January 1, 2020, subject to Mr. Goodman’s continued service as a senior advisor to GSO through each applicable date.

In connection with his withdrawal as a senior managing director, Mr. Goodman also entered into a customary withdrawal agreement with us. Under the terms of the withdrawal agreement, Mr. Goodman agreed to enter into a general release of claims in favor of Blackstone and its related parties on terms generally comparable to other departing senior managing directors and affirmed his

non-competition,

non-solicitation,

non-disparagement

and confidentiality covenants contained in his

non-competition

and

non-solicitation

agreement.

For 2019, Mr. Goodman received a base salary of $350,000 and an annual cash bonus payment of $2,650,000. The cash payment was based upon the performance of the Credit segment, including the contribution of all current and past funds within the segment. The ultimate cash payment to Mr. Goodman was, however, determined in the discretion of Mr. Schwarzman and Mr. Gray.

Mr. Goodman also participated in the performance fees of our funds, consisting of carried interest in our carry funds and incentive fees in our funds that pay incentive fees. The compensation paid to Mr. Goodman in respect of carried interest in our carry funds primarily relates to Mr. Goodman’s participation in the credit funds (which were formed both before and after the acquisition of GSO Capital Partners by Blackstone). The amount of cash payments in respect of carried interest or incentive fee allocations to Mr. Goodman for 2019 was $1,291,990. See “Executive Compensation — Compensation Elements for Named Executive Officers” in this report for additional discussion of the elements of our compensation program.

Pursuant to the terms of the arrangement we entered into with him in November 2018, in connection with Mr. Goodman’s termination of employment on January 1, 2020, 638,539 of his outstanding deferred restricted Blackstone Holdings Partnership Units vested on January 1, 2020, 638,539 of his outstanding deferred restricted Blackstone Holdings Partnership Units will remain outstanding and become fully vested on January 1, 2021 and 319,269 of his outstanding deferred restricted Blackstone Holdings Partnership Units will remain outstanding and become fully vested on January 1, 2022. In addition, Mr. Goodman also remains eligible to participate in Blackstone’s

side-by-side

and similar investment programs for up to five years following his retirement, in some cases without being subject to management fees, carried interest or incentive fees.

Blackstone Holdings Partnership Agreements

As a result of the reorganization and the IPO, The Blackstone Group Inc. (at that time, The Blackstone Group, L.P.) became a holding partnership and, through wholly owned subsidiaries, held equity interests in the five holdings partnerships (i.e., Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and Blackstone Holdings V L.P.). On January 1, 2009, in order to simplify our structure and ease the related administrative burden and costs, we effected an internal restructuring to reduce the number of holding partnerships from five to four by causing Blackstone Holdings III L.P. to transfer all of its assets and liabilities to Blackstone Holdings IV L.P. In connection therewith, Blackstone Holdings IV L.P. was renamed Blackstone Holdings III L.P. and Blackstone Holdings V L.P. was renamed Blackstone Holdings IV L.P. On October 1, 2015, Blackstone formed a new holding partnership, Blackstone Holdings AI L.P., which holds certain operating entities and operates in a manner similar to the other Blackstone Holdings Partnerships. The economic interests of The Blackstone Group Inc. in Blackstone’s business remains entirely unaffected. “Blackstone Holdings” refers to (a) Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and Blackstone Holdings V L.P. prior to the January 2009 reorganization, (b) Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P. and Blackstone Holdings IV L.P. from January 1, 2009 through October 1, 2015 and (c) Blackstone Holdings I L.P., Blackstone Holdings II L.P., Blackstone Holdings III L.P., Blackstone Holdings IV L.P. and Blackstone Holdings AI L.P. subsequent to the October 2015 creation of Blackstone Holdings AI L.P.

Wholly owned subsidiaries of The Blackstone Group Inc. which are the general partners of those partnerships have the right to determine when distributions will be made to the partners of Blackstone Holdings and the amount of any such distributions. If a distribution is authorized, such distribution will be made to the partners of Blackstone Holdings

pro-rata

in accordance with the percentages of their respective partnership interests as described under “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy.”

Each of the Blackstone Holdings Partnerships has an identical number of partnership units outstanding, and we use the terms “Blackstone Holdings Partnership Unit” or “partnership unit in/of Blackstone Holdings” to refer, collectively, to a partnership unit in each of the Blackstone Holdings Partnerships. The holders of partnership units in Blackstone Holdings, including The Blackstone Group Inc.’s wholly owned subsidiaries, will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Blackstone Holdings. Net

profits and net losses of Blackstone Holdings will generally be allocated to its partners (including The Blackstone Group Inc.’s wholly owned subsidiaries)

pro-rata

in accordance with the percentages of their respective partnership interests as described under “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy.” The partnership agreements of the Blackstone Holdings Partnerships provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if the wholly owned subsidiaries of The Blackstone Group Inc. which are the general partners of the Blackstone Holdings Partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions are computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the

non-deductibility

of certain expenses and the character of our income). Tax distributions are made only to the extent all distributions from such partnerships for the relevant year are insufficient to cover such tax liabilities.

Subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, Blackstone Holdings Partnership Units may be exchanged for shares of Class A common stock as described under “— Exchange Agreement” below. In addition, the Blackstone Holdings partnership agreements authorize the wholly owned subsidiaries of The Blackstone Group Inc. which are the general partners of those partnerships to issue an unlimited number of additional partnership securities of the Blackstone Holdings Partnerships with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Blackstone Holdings Partnership Units, and which may be exchangeable for shares of our Class A common stock.

See “— Item 11. Executive Compensation — 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” for a discussion of vesting provisions applicable to Blackstone personnel in respect of the Blackstone Holdings Partnership Units received by them in the reorganization and for a discussion of minimum retained ownership requirements and transfer restrictions applicable to the Blackstone Holdings Partnership Units. The generally applicable vesting and minimum retained ownership requirements and transfer restrictions are outlined in the sections referenced in the preceding sentence. There may be some different arrangements for some individuals in some instances. In addition, we may waive these requirements and restrictions from time to time.

In addition, substantially all of our expenses, including substantially all expenses solely incurred by or attributable to The Blackstone Group Inc. but not including obligations incurred under the tax receivable agreement by The Blackstone Group Inc.’s wholly owned subsidiaries, income tax expenses of The Blackstone Group Inc.’s wholly owned subsidiaries and payments on indebtedness incurred by The Blackstone Group Inc.’s wholly owned subsidiaries, are borne by Blackstone Holdings.

Exchange Agreement

In connection with the reorganization and IPO, we entered into an exchange agreement with the holders of partnership units in Blackstone Holdings (other than The Blackstone Group Inc.’s wholly owned subsidiaries), which was subsequently amended in connection with the Conversion. In addition, newly-admitted Blackstone senior managing directors and certain others who acquire Blackstone Holdings Partnership Units also become parties to the exchange agreement. Under the exchange agreement, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, each such holder of Blackstone Holdings Partnership Units (and certain transferees thereof) may up to four times each year (subject to the terms of the exchange agreement) exchange these partnership units for shares of our Class A common stock on a

one-for-one

basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. Under the exchange agreement, to effect an exchange a holder of partnership units in Blackstone Holdings must simultaneously exchange one partnership unit in each of the Blackstone Holdings Partnerships. As a holder exchanges its Blackstone Holdings Partnership Units, The Blackstone Group Inc.’s indirect interest in the Blackstone Holdings Partnerships will be correspondingly increased.

Firm Use of Private Aircraft

Certain entities controlled by Mr. Schwarzman wholly own aircraft that we use for business purposes in the course of our operations, and in 2019, we made payments of $3.0 million for the use of such aircraft, which included $1.6 million paid directly to the managers of the aircraft. An entity controlled by Mr. Gray wholly owns aircraft that we use for business purposes in the course of our operations, and in 2019, we made payments of $1.2 million for the use of such aircraft, which included $0.7 million paid directly to the manager of the aircraft for such use. An entity jointly controlled by Mr. James and another individual wholly owned aircraft that we used for business purposes in the course of our operations, and in 2019, we made payments of $0.3 million to the manager of the aircraft for such use. An entity jointly controlled by Mr. Baratta and two other individuals, owns aircraft that we use for business purposes in the course of our operations, and in 2019, we made payments of $0.1 million for the use of such aircraft. An entity controlled by Mr. Goodman, jointly with an entity controlled by another individual, owns aircraft that we use for business purposes in the course of our operations, and in 2019, we made payments of $0.4 million for the use of such aircraft. Each of Messrs. Schwarzman, Gray, James, Baratta and Goodman paid for his respective ownership interest in his aircraft himself and bore his respective share of all operating, personnel and maintenance costs associated with the operation of such aircraft. The hourly payments we made for use of such aircraft were based on current market rates.

Investment in or Alongside Our Funds

Our directors and executive officers may invest their own capital in or alongside our funds and other vehicles we manage, in some instances, without being subject to management fees, carried interest or incentive fees. For our carry funds, these investments may be made through the applicable fund general partner and fund a portion of the general partner capital commitments to our funds. These investment opportunities are available to all of our senior managing directors and to those of our employees whom we have determined to have a status that reasonably permits us to offer them these types of investments and in compliance with applicable laws. During the year ended December 31, 2019, our directors and executive officers (and, in some cases, certain investment trusts or other family vehicles or charitable organizations controlled by them or their immediate family members) had the following gross contributions relating to their personal investments (and the investments of any such trusts) in Blackstone funds and other Blackstone-managed vehicles: Mr. Schwarzman, Mr. James, Mr. Gray, Mr. Goodman, Mr. Chae, Mr. Breyer, Mr. Baratta, Ms. Solotar, Mr. Finley, Mr. Light, Mr. Parrett and Mr. Mulroney made gross contributions of $347.3 million, $109.1 million, $40.0 million, $12.2 million, $10.1 million, $8.4 million, $5.1 million, $3.9 million, $1.0 million, $0.3 million, $0.3 million, and $0.2 million, respectively.

Statement of Policy Regarding Transactions with Related Persons

Our board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined as in paragraph (a) of Item 404 of Regulation

S-K)

must promptly disclose to the Chief Legal Officer any “related person transaction” (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The Chief Legal Officer will then promptly communicate that information to the board of directors. No related person transaction will be consummated without the approval or ratification of the board of directors or any committee of the board of directors consisting exclusively of disinterested directors. It is our policy that directors interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest.

Non-Competition

and

Non-Solicitation

Agreements

We have entered into a

non-competition

and

non-solicitation

agreement with each of our professionals and other senior employees, including each of our executive officers. See “— Item 11. Executive Compensation —

Non-Competition

and

Non-Solicitation

Agreements” for a description of the material terms of such agreements.

Director Independence

See “— Item 10. Directors, Executive Officers and Corporate Governance — Controlled Company Exception and Director Independence” for information on director independence.