The $64-million man: Onex chairman and CEO Gerry SchwartzMark Blinch/Reuters
Onex Corp. founder Gerry Schwartz was the $64-million (U.S.) man in 2011, as a good year for the private equity firm's investments translated into an historic payday.
Mr. Schwartz's 2011 income would rank among the largest Canadian pay packets of any year, easily topping the salaries and bonuses of corporate nabobs such as the chiefs of the big banks.
However, by the standards of private equity titans operating in New York, Mr. Schwartz is a poor cousin.
The head of Blackstone Group LP, Stephen Schwarzman, had a total pay package of about $214-million. Henry Kravis and George Roberts of KKR & Co. – men that Mr. Schwartz worked with when he was a New York banker – took home $94-million apiece.
Still, all bragging rights are not lost. Mr. Schwartz can point to the fact that Onex shareholders did better than those of Blackstone. Onex shares gained about 10 per cent last year, while Blackstone's fell.
Mr. Schwartz's big payout comes as Onex booked two big investment wins in 2011, leading to a strong year for its buyout funds, which invest money on behalf of institutions such as pension funds. Onex sold one large company it owned for a return of about three times and another for closer to eight times Onex's original outlay.
"He got paid for performance," said Steven Kaplan, a professor at the University of Chicago's Booth School of Business who has studied private equity. "The reason that institutions give money to private equity investors is they understand that, net of fees, you outperform the public markets, and that's a good thing."
Mr. Kaplan said his research shows that private equity funds generally deliver returns that top investing in public stocks. Still, such compensation numbers for private equity bosses are likely to raise eyebrows.
"Those people [investors]are happy, but the numbers are very large and with the economy slow, it gets a lot of attention," Mr. Kaplan said.
Mr. Schwartz's compensation is laid out in a filing that Onex released on Thursday, which shows his compensation soared from about $12-million in 2010.
His base salary rose and bonus totalled $14.3-million, up from $8.2-million in 2010.
The big increase came in what Onex generated for Mr. Schwartz from its investments. Onex's main deal makers can invest directly in transactions that the firm does, and returns from that can bring in millions in a good year.
Onex executives received returns of $56.5-million from the investments last year, with $20.8-million of that going to Mr. Schwartz.
Onex's top executives also get a share of the profits generated by the buyout funds that Onex runs, so long as they meet targets for returns. Mr. Schwartz's share of that so-called "carried interest" totalled $26.2-million last year.
What's more, Onex shares pay a dividend, and Mr. Schwartz is the largest single holder of the stock. His dividend cheques tally to about $2.5-million a year.