Expert Perspective from Grahall’s OmniMedia Editorial Board
In the February 2, 2010 article by Joe Bel Bruno (Dow Jones News Wire) in The Wall Street Journal (Lazard Posts 4Q Loss On Compensation Costs) tell us that “Lazard Ltd. reported an unexpected fourth-quarter loss Wednesday, hurt by charges triggered from the death of its former chief executive and a major overhaul of its compensation program.”
In part the reason for this loss is that Lazard has made a decision to buck the Wall Street trend (embraced by competitors like Goldman and Morgan Stanley), by deciding to “get rid of deferred cash compensation that pays workers over a number of years, a move that could attract top talent from bigger Wall Street firms saddled by tougher pay restrictions.”
This change to “all cash” compensation is justified by Lazard because they, unlike their competitors, “…largely avoided mortgage-backed securities and other complex instruments that felled bigger rivals, doesn’t take on risk like the major Wall Street banks.” Quoting Michael J. Castellano, Lazard CFO, the article goes on to say: “The changes in its pay structure will eliminate deferred cash payments and align compensation expenses with annual revenue…”
We believe that the practice of concentrating a CEO’s and other executives’ personal wealth in the form of his own company’s stock is poor compensation strategy and worse business strategy.
Continue reading “Bucking the Trend” »