How Much Is Too Much?

Private equity mogul Stephen Schwarzman made $400 million last year. His partner Pete Peterson took home $213 million. Media baron Barry Diller's pay package was worth at least $295 million. They're worth it. Just ask them.

Every time we learn about another plutocrat's massive cash haul, the news media goes apopleptic. Headlines scream about overpaid CEOs and the exploitation of lowly shareholders. And there is the envy factor, that's if you can actually wrap your head around the number. But seriously, do they deserve all that money?

There will always be overpaid CEOs rewarded in spite of poor performance, but that's not always the case. Schwarzman, Peterson and Diller are all getting paid these huge sums, at least in part, because they have created value. In the case of the two financiers, their pay packages are directly tied to the outcome of their investment decisions.

"Certainly, the numbers are large but there is much less controversy about private firms because people are willing to pay for performance," says Espen Eckbo, a founding director at the Center for Corporate Governance. "The actual pay is based on how the firm performed. And you can compute the returns based upon the assets that private equity firms hold. If someone makes $100 for you, you wouldn't mind paying them $10 or $20 for that."

So just imagine buying a house for $400,000 and flipping it 20 years later to a condo developer for $33.6 billion, plus you get to keep a penthouse apartment for yourself.

That's the equivalent of what Schwarzman is about to accomplish when he takes Blackstone, his private equity firm, public in a much-anticipated IPO later this month.

Schwarzman's stake in Blackstone, which he founded in 1985, is worth around $7.73 billion, according to new compensation details issued by the company. The firm's holdings are now valued at $33.6 billion.

Schwarzman and Peterson's pay packages dwarf the salaries of chief executives at most public companies. The highest-paid chief executive was Yahoo's Terry Semel, who received $71.1 million in pay, stock options and other compensation last year, according to a recent study by The Associated Press.

When exercised stock options and vested restricted stock are counted, those numbers increase. Apple's Steve Jobs tops the list at $647 million, according to a list compiled by Forbes magazine.

Back in the 1980s, former Chrysler chairman Lee Iacocca said he didn't think any executive deserved to be paid more than a million dollars.

How times have changed. In this new gilded age, a million dollars is barely enough to cover the entertainment at Schwarzman's 60th birthday bash.

For the party last February, Schwarzman reportedly spent $3 million to rent out New York's cavernous Park Avenue Armory, which was decorated to replicate his Park Avenue apartment, to book Rod Stewart and Patti LaBelle to perform, and to pay for a dinner that included lobster, baked Alaska and a 2004 Louis Jadot Chassagne Montrachet.

At his 11,000-square-foot Palm Beach mansion, Schwarzman spends $3,000 a weekend on food, including $400 stone crabs, for him and his wife, reports The Wall Street Journal.

According to the paper, when his family was debating whether Schwarzman should take Blackstone public, one asked him, "Do we need any more money?" Schwarzman's mother, Arline, interrupted, "You don't understand what drives him. Money is the measuring stick."

Schwarzman and other billionaires don't just live in a different area code from most Americans, they inhabit a whole other country. In his new book, "Richistan," author Robert Frank chronicles the quirks and habits of the new gentry who have 100-strong staffs to run their mansions, employ "arborists," consider anything less than an 100-foot boat a dinghy and who make fun of those poor schmucks who can only afford to buy their girlfriends a new Mercedes SLK.

But while excessive executive compensation has been hotly debated in recent years at public companies -- Semel is under fire from Yahoo shareholders upset at the size of his pay package as the company's stock dipped 10 percent in the last 12 months -- the Blackstone numbers haven't stirred up much of a storm. The company's investors paid them to perform, and they did. Like it or not, they did it and it's legal.