Form DEF 14A Lazard Ltd For: Apr 29

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Preliminary Proxy Statement

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Notice of Annual

Meeting and

Proxy Statement

NOTICE OF 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

Date:

April 29, 2021

Time:

9:00 a.m. Eastern Daylight Time

Place:

Virtual annual meeting

www.meetingcenter.io/267587835

Password LAZ2021

In light of the continuing public health concerns regarding the COVID-19 pandemic, the Annual General Meeting of Shareholders will again be held in a virtual meeting format only.  Please see the General Information section of this Proxy Statement for additional information regarding voting and attending our Annual General Meeting of Shareholders.  

The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K are available free of charge at www.lazard.com/investorrelations/

1.

Election of three directors to our Board of Directors for a three-year term expiring at the conclusion of the Company’s annual general meeting in 2024;

2.

Consideration of a non-binding advisory vote regarding executive compensation;

3.

Approval of the amendment to our 2018 Incentive Compensation Plan, or the 2018 Plan, to increase the number of shares of Class A common stock authorized for issuance under the 2018 Plan.  We refer to this as the “2018 Incentive Compensation Plan Amendment”;

4.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2021 and authorization of the Company’s Board of Directors, acting by its Audit Committee, to set their remuneration; and

5.

Consideration of any other matters that may properly be brought before the meeting or any adjournment or postponement thereof.

By order of the Board of Directors,

Scott D. Hoffman

Chief Administrative Officer, General Counsel

and Secretary

Agenda
Item

Matter

Board
Recommendation

Item 1

Election of three directors to our Board of Directors for a three-year term expiring at the conclusion of the Company’s annual general meeting in 2024

VOTE FOR

Item 2

Consideration of a non-binding advisory vote regarding executive compensation

VOTE FOR

Item 3

Approval of the 2018 Incentive Compensation Plan Amendment

VOTE FOR

Item 4

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2021 and authorization of the Company’s Board of Directors, acting by its Audit Committee, to set their remuneration

VOTE FOR

OPERATING REVENUE

AWARDED
COMPENSATION RATIO

OPERATING MARGIN,
AWARDED BASIS

$2,524M

Operating revenue reflects strong performance in Financial Advisory and Asset Management; 1% lower than operating revenue in 2019

59.8%

Continuing cost discipline with consistent deferral policy

23.1%

Consistent focus on our operating margin

RETURN OF CAPITAL

NET INCOME,

AS ADJUSTED

ADJUSTED EARNINGS PER SHARE, DILUTED

$365M

Demonstrated long-term commitment to shareholder value creation and return of excess capital

$410M

7% higher than 2019

$3.60

10% higher than 2019

Independent Board

•  Nine of our eleven current directors are independent, as is our new director nominee

•  All Committees of the Board of Directors, or the Board, are comprised entirely of independent directors

Strong Independent
Lead Director

•  Active Lead Independent Director with expansive responsibilities

•  Selected by independent directors

Diverse and
Engaged Board

•  Diverse and international Board in terms of gender, ethnicity and nationality; following the Annual General Meeting, we expect that half of our independent directors will be women

•  Wide array of qualifications, skills and attributes to the Board, supporting its oversight role on behalf of shareholders

•  Overall attendance by our directors at Board and Committee meetings averaged over 99% in 2020

•  Annual Board and Committee evaluations and self-assessments

Executive Sessions

•  Independent directors meet regularly without management present

Succession Planning

•  Board takes an active role in succession planning

•  Succession and executive development are discussed with the Chief Executive Officer, or CEO, as well as without the CEO present in executive sessions

•  Directors meet with senior managers who are not Named Executive Officers, or NEOs

New Term Limit
Policy and
Continued Board Refreshment

•  In early 2021, we implemented a term limit policy for independent directors

•  Independent directors are limited to serving four complete terms, in addition to any partial term

•  New independent director nominated for election in 2021 resulting in five new independent directors nominated or appointed over the last five years

Disciplined
Compensation
Programs

•  We pay for performance and we are committed to compensation discipline and governance

•  We have enhanced our compensation programs to encourage investment for the future growth of our business and to include a modifier tied to total shareholder return, further aligning the performance of our NEOs to shareholder success

Board Equity
Ownership

•  Majority of director compensation is paid in deferred stock units which remain invested in the Company until the director leaves the Board

Accountability

•  Majority voting policy for directors in uncontested elections

•  No shareholder rights plan or poison pill

•  Shareholders owning 10% or more of our outstanding share capital have the right to convene a special meeting

Committees of the Board of Directors

Board of Directors

Audit

Compensation

Nominating &
Governance

Workplace and
Culture

Andrew M. Alper

(Independent)

✓

Chair

Ashish Bhutani

(CEO of LAM)

Richard N. Haass

(Independent)

✓

✓

Steven J. Heyer

(Independent)

✓

✓

Chair

Kenneth M. Jacobs

(Chairman and CEO)

Michelle Jarrard

(Independent)

✓

✓

✓

Sylvia Jay

(Independent)

✓

✓

Iris Knobloch

(Independent)

✓

✓

Philip A. Laskawy

(Independent)

Chair

✓

Jane L. Mendillo

(Independent)

✓

✓

Richard D. Parsons

(Lead Independent Director)

✓

✓

Chair

•

Kenneth M. Jacobs serves as Chairman of our Board of Directors and CEO. Richard D. Parsons serves as our Board’s Lead Independent Director, or Lead Director. This leadership structure provides:

▪

unified leadership and focused vision;

▪

effective leadership in light of the nature of the Company and its experience and history; and

▪

fluid communication and coordination between the Board and management.

•

Our Lead Director, working with our other independent directors:

▪

provides active oversight of the development and implementation of the Company’s strategy;

▪

provides thorough oversight and evaluation of CEO and senior management performance and compensation, and has regular discussions with our CEO about the Company and its strategy; and

▪

reviews and approves Board meeting schedules and agendas.

•

Our Board has determined that nine of our Board’s eleven current members (representing over 80% of our Board’s members), including our Lead Director, are independent under the listing standards of the New York Stock Exchange, or the NYSE, and our own Standards of Director Independence.

•

Our Board has determined that our new director nominee is independent under the same standards.

•

Each of the Board’s Committees, including the Compensation Committee, which ultimately determines the CEO’s compensation, consists entirely of independent directors, and each Committee has a different chairperson.

•

Each Committee Chair reviews and approves meeting schedules and agendas for their relevant Committee.

•

Executive sessions of our Board follow regularly scheduled Board meetings, and our Lead Director presides over executive sessions.

•

Many meetings of the Board’s Committees also include executive sessions, and the Chair of the applicable Committee presides over those executive sessions.

•

Our Board, through its Nominating & Governance Committee, evaluates itself annually and feedback is discussed at meetings of the Nominating & Governance Committee and the Board.

•

We highly value the perspectives of our stakeholders and proactively engage throughout the year.

•

In 2020, we hosted meetings with approximately 90% of active shareholders, based on reported holdings, and numerous potential shareholders.

•

We prioritize long-term value creation and return of excess capital to shareholders through a flexible capital allocation strategy, while retaining sufficient capital for operating needs.

•

We believe we have a strong pay for performance compensation program with rigorous quantitative metrics and our employees hold a significant portion, approximately 21%, of fully diluted shares outstanding.

•

We assess feedback from our stakeholders and continually enhance dialogue and reporting of pertinent investor information.

•

Our Board has oversight responsibility for our global culture and sustainability efforts, while management provides senior-level input and review and strategic execution of our initiatives.

•

Our annual Corporate Sustainability Report, or CSR, addresses environmental, social and governance (ESG) topics important to our stakeholders and to our business.  Recent additions to our CSR include:

▪

Depiction of the results of our materiality assessment conducted to prioritize ESG topics

▪

Presentation of our Guiding Principles: Excellence, Empowerment and Engagement

▪

Alignment of values and strategic pillars

▪

Independent verification of greenhouse gas (GHG) emissions

▪

Response to the Sustainability Accounting Standards Board (SASB)

•

Our focus on ESG topics include:

▪

Evaluating environmental risks and opportunities in our investments and strategic advice;

▪

Continuing to foster our culture of excellence and increasing our focus on diversity, inclusion and equality; and

▪

Leading with integrity and engaging with our stakeholders.

•

Our pledge to the CEO Action for Diversity & Inclusion reaffirms our commitment to building a stronger and more diverse workforce, and expanding mentorship and allyship.

•

Our commitment to the United Nations Global Compact, the world’s largest corporate sustainability initiative, solidifies our alignment with the ten principles addressing human rights, labor, environment and anti-corruption.

✓

Retain and Attract Talented Individuals 

✓

Structured Decision-Making Process

✓

Pay for Performance 

✓

Commitment to Compensation Governance

✓

Pay with Long-Term, Forward-Looking Equity Awards

✓

Maintain Compensation Discipline

✓

Pay with Performance-based, “At-risk” Awards 

✓

Consistency on Deferred Compensation

Fixed Compensation

Base Salary

Salary for most recent fiscal year

Performance-based
Compensation

Annual Cash Incentive

Determined based on the Compensation Committee’s assessment of Company, business segment (for the CEOs of LAM and Financial Advisory) and individual performance during the fiscal year and, in the case of the CEO, his performance in reference to goals and objectives set during the year

Performance-based
Equity Awards

Long-term “at-risk” equity awards with payout based on objective and pre-selected criteria 

Fixed Compensation

Base Salary

$

900,000

9% of Total Compensation

Performance-based

Annual Cash Incentive

$

2,100,000

21% of Total Compensation

Compensation

Performance-based
Equity Awards

$

7,000,000

70% of Total Compensation

Our CEO’s 2020 Compensation Mix

•

our strong financial performance in 2020, as reflected in the 2020 financial highlights described above, in the context of a global pandemic and associated global macroeconomic conditions and, in particular, our strong results in the second half of 2020;  

•

the continued achievement of our financial goals described in this Proxy Statement;

•

our CEO’s active engagement throughout the pandemic and management of business operations through the crisis, including his extraordinary leadership in managing the sudden transition to a remote work environment necessary to protect employee health and safety, proving the value of the Company’s investments in technology infrastructure;

•

through our CEO’s leadership, the Company’s continued cultivation of a workplace culture that fosters productivity and professional and personal development, and values diversity and inclusion, while successfully attracting, retaining and motivating valuable professionals;

•

our continued active communication with shareholders and the analyst community regarding our strategic plan, initiatives for profitable growth and ESG efforts through the publication of the CSR, and dedication to strengthening our outreach efforts and enhancing investor awareness of the Company’s business model, strategic objectives and accomplishments;

•

our CEO’s individual contributions toward client relationships and activities in support of our Financial Advisory business;

•

our CEO’s active role in the recruitment of key professionals across our businesses and the development of new investment strategies in our Asset Management business; and

•

our CEO’s leadership in maintaining and fostering a culture of cost discipline throughout the firm, reaffirming our commitment to cost control.

(1)  Includes one independent director and our executive directors.           

The Board of Directors recommends a vote FOR the election of each nominee listed below.

Ann-Kristin Achleitner

Age: 55 years

Ann-Kristin Achleitner has spent over thirty years as an economist and educator.  She is a Distinguished Affiliated Professor at the Technical University of Munich (TUM), where she held the Chair of Entrepreneurial Finance between 2001 and 2020.  An accomplished academic with multiple honors and publications, she now acts primarily as a non-executive board director and venture investor.  She currently sits on the Munich Re Supervisory Board and the Linde board of directors. She is also a member of multiple boards of nonpublic institutions and foundations such as the Institute for Advanced Studies (Princeton) and the German National Academy of Science and Engineering (acatech). Previously, she served as a member of the board of directors of Deutsche Börse from 2016 until 2019 and was a member of the board of directors of Engie from 2012 until 2019. Prof. Achleitner received her doctorates in business administration as well as law from the University of St. Gallen (HSG) in Switzerland.  After a brief career as a management consultant with McKinsey, she held the Chair of Banking and Finance at the European Business School (EBS) in Oestrich-Winkel, Germany from 1995 to 2001.  She has served on multiple commissions for the German, Bavarian and Swiss governments, as well as for the EU commission, various World Economic Forum groupings, as well as multiple award juries.

Qualifications: Prof. Achleitner was selected to be a director of Lazard because of her broad and substantial experience across the financial industry, including as an internationally recognized leader in entrepreneurship finance, and the Board’s desire to add to its diversity of perspective, knowledge and geography.

Andrew M. Alper

Age: 63 years

Independent Director

Director since October 2012

Committees:

•  Audit

•  Compensation (Chair)

Andrew M. Alper serves as Chairman of Alper Investments, Inc. From October 2006 to January 2013, Mr. Alper served as the Chairman and Chief Executive Officer of EQA Partners, LP, a limited partnership engaged in a global macro strategy. From February 2002 to June 2006, Mr. Alper served as President of the New York City Economic Development Corporation and Chairman of the New York City Industrial Development Agency, appointed to both positions by Mayor Michael Bloomberg. Prior to that, Mr. Alper spent 21 years in the Investment Banking Division of Goldman, Sachs & Co., where he was Chief Operating Officer of the Investment Banking Division from 1997 to 2000. Mr. Alper was co-head of the Financial Institutions Group of the Investment Banking Division of Goldman, Sachs & Co. from 1994 to 1997. Mr. Alper previously served on the board of directors of FBR Capital Markets Corporation from January 2007 until June 2009. Mr. Alper is a member of the board of trustees of the University of Chicago and served as its Chairman from June 2009 until May 2015. Mr. Alper also serves as a trustee of the University of Chicago Medical Center and the Mount Sinai Medical Center in New York.

Qualifications: Mr. Alper was selected to be a director of Lazard because of his extensive experience with the financial and operational aspects of businesses that are comparable to Lazard, as well as his background and experience in government service.

Ashish Bhutani

Age: 60 years

Executive Director

Director since March 2010

Ashish Bhutani is a Vice Chairman and a Managing Director of Lazard and has been the Chief Executive Officer of Lazard Asset Management LLC, or LAM, since March 2004. Mr. Bhutani previously served as Head of New Products and Strategic Planning for LAM from June 2003 to March 2004. Prior to joining Lazard, he was Co-Chief Executive Officer, North America, of Dresdner Kleinwort Wasserstein from 2001 to the end of 2002, and was a member of its Global Corporate and Markets Board, and a member of its Global Executive Committee. Mr. Bhutani worked at Wasserstein Perella Group (the predecessor to Dresdner Kleinwort Wasserstein) from 1989 to 2001, serving as Deputy Chairman of Wasserstein Perella Group and Chief Executive Officer of Wasserstein Perella Securities from 1994 to 2001. Mr. Bhutani began his career at Salomon Brothers in 1985, where he was a Vice President in Fixed Income. Mr. Bhutani is a member of the Board of Directors of four registered investment companies, which are part of the Lazard fund complex. Mr. Bhutani is also a member of the Board of Directors of City Harvest.  

Qualifications: Mr. Bhutani was selected to be a director of Lazard because of his extensive background, experience and knowledge of the asset management industry, his role within the firm as Chief Executive Officer of LAM and Mr. Jacobs’ and the Board’s desire that Mr. Bhutani become a regular contributor to the Board’s deliberations.

Richard N. Haass

Age: 69 years

Independent Director

Director since April 2016

Committees:

•  Nominating & Governance

•  Workplace and Culture

Richard N. Haass, in his eighteenth year as president of the Council on Foreign Relations, has served as the senior Middle East advisor to President George H.W. Bush and as a principal advisor to Secretary of State Colin Powell. He was also U.S. coordinator for policy toward the future of Afghanistan and the U.S. envoy to both the Cyprus and Northern Ireland peace talks. A recipient of the State Department’s Distinguished Honor Award, the Presidential Citizens Medal, and the Tipperary International Peace Award, Dr. Haass has authored or edited books on both U.S. foreign policy and management. A Rhodes Scholar, he holds Master and Doctor of Philosophy degrees from Oxford University. From February 2007 until February 2015, Dr. Haass served as a member of the board of directors of Fortress Investment Group.

Qualifications: Dr. Haass was selected to be a director of Lazard because of his global perspective, fostered over many years at the highest levels of engagement, as well as his background and experience in government service.

Jane L. Mendillo

Age: 62 years

Independent Director

Director since April 2016

Committees:

•  Audit

•  Workplace and Culture

Jane L. Mendillo has spent over 30 years in the fields of endowment and investment management. As the CEO of the Harvard Management Company from 2008 to 2014, she managed Harvard University’s approximately $37 billion global endowment and related assets across a wide range of public and private markets. Ms. Mendillo was previously the Chief Investment Officer at Wellesley College for six years. Prior to that, she spent 15 years at the Harvard Management Company in various investment roles. Earlier in her career she was a management consultant at Bain & Co. and worked at the Yale Investment Office. Ms. Mendillo is a member of the board of directors of General Motors. She is also on the board of directors of the Berklee College of Music. She also serves as senior investment advisor and trustee to the Old Mountain Private Trust Company. She is a graduate of Yale College and the Yale School of Management.

Qualifications: Ms. Mendillo was selected to be a director of Lazard because of her unique financial perspective, having successfully stewarded Harvard Management Company through the financial crisis, and her extensive experience in the field of asset management.

Richard D. Parsons

Age: 72 years

Lead Independent Director

Director since June 2012

Committees:

•  Compensation

•  Nominating & Governance

•  Workplace and Culture (Chair)

Richard D. Parsons is a co-founder and partner of Imagination Capital LLC, a venture capital firm launched in November 2017, and has been a senior advisor to Providence Equity Partners LLC since September 2009. Mr. Parsons is a member of the board of directors of The Estée Lauder Companies Inc., The Madison Square Garden Company and Group Nine Acquisition Corp. From September 2018 to October 2018, Mr. Parsons served as the interim Chairman of the board of directors of CBS Corporation. From May 2014 to September 2014, Mr. Parsons served as the interim Chief Executive Officer of the Los Angeles Clippers. Mr. Parsons previously served as Chairman of the board of directors of Citigroup Inc. from February 2009 through April 2012, and had served as a director of Citigroup Inc. since 1996. From May 2003 until his retirement in December 2008, Mr. Parsons served as Chairman of the board of directors of Time Warner Inc., and from May 2002 until December 2007, Mr. Parsons served as Chief Executive Officer of Time Warner Inc. Mr. Parsons was formerly Chairman and Chief Executive Officer of Dime Bancorp, Inc. Among his numerous community and nonprofit activities, Mr. Parsons is chairman emeritus of the Partnership for New York City, chairman of the Jazz Foundation of America, and chairman of the board of trustees of the Rockefeller Foundation. He also serves on the boards of the Commission on Presidential Debates and the Apollo Theater Foundation.

Qualifications: Mr. Parsons was selected to be a director of Lazard because of his extensive and diverse leadership experience with both financial services and non-financial services businesses.

Kenneth M. Jacobs

Age: 62 years

Executive Director
Director since November 2009

Kenneth M. Jacobs has served as Chairman of the Board of Directors and Chief Executive Officer of Lazard Ltd and Lazard Group since November 2009. Mr. Jacobs has served as a Managing Director of Lazard since 1991 and had been a Deputy Chairman of Lazard from January 2002 until November 2009. Mr. Jacobs also served as Chief Executive Officer of Lazard North America from January 2002 until November 2009. Mr. Jacobs initially joined Lazard in 1988. Mr. Jacobs is a member of the Board of Trustees of the University of Chicago and the Brookings Institution. Mr. Jacobs earned an MBA from the Stanford University Graduate School of Business and a Bachelor’s Degree in Economics at the University of Chicago.

Qualifications: Mr. Jacobs was selected to be the Chairman and Chief Executive Officer of Lazard because of his vision, intellect and dynamism, his proven track record of creativity in building new businesses, and his skills as a trusted advisor, collaborator and team leader.

Michelle Jarrard

Age: 53 years

Independent Director

Director since January 2017

Committees:

•  Audit

•  Compensation

•  Workplace and Culture

Michelle Jarrard is a former Senior Partner of McKinsey & Company, where she held multiple senior leadership roles during her 25-year career, most recently as Global Chief HR and Talent Officer from 2007 until her retirement in January 2016. She was a member of McKinsey’s Global Operating Committee, with responsibilities including: People Strategy; Talent Acquisition and Development; Learning; Partner Compensation & Evaluation; Diversity; HR Analytics, Policies & Risk; and Internal Communications. Ms. Jarrard serves as President and CEO of, and also serves on the board of directors of, BioCircuit Technologies, an early-stage medical device company in the field of bioelectronic interfacing.  From January 2016 to August 2018, Ms. Jarrard was a Managing Director of the GRA Venture Fund, LLC, a private investment fund providing early-stage capital to Georgia-based technology companies. Ms. Jarrard is on the board of directors of Crawford & Company, as well as several private companies, including Axion Biosystems, QUEST Renewables and Inspire Brands. She earned her MBA from Harvard Business School and a Bachelor’s Degree in Industrial Engineering from the Georgia Institute of Technology.

Qualifications: Ms. Jarrard was selected to be a director of Lazard because of her experience serving in senior leadership positions, including human capital development positions, within a major professional services firm.

Iris Knobloch

Age: 58 years

Independent Director

Director since April 2018

Committees:

•  Compensation

•  Nominating and Governance

Iris Knobloch is currently President of WarnerMedia in France, Germany, the Benelux, Austria and Switzerland and was previously President of Warner Bros. Entertainment in France beginning in 2006. She is responsible for the development and execution of WarnerMedia’s strategy as well as coordinating and optimizing all commercial and group marketing activities in the region. Previously, she was in charge of Time Warner’s International Relations and Strategic Policy for Europe. Prior to Warner Bros., Ms. Knobloch was an attorney with Norr, Stiefenhofer & Lutz and with O’Melveny & Myers in Munich, New York and Los Angeles. Ms. Knobloch is the Vice Chairman and Lead Independent Director of the board of directors of AccorHotels and a member of the board of directors of LVMH Moët Hennessy-Louis Vuitton. She is a governor of the American Hospital in Paris. She was previously a member of the supervisory board of Axel Springer from April 2018 until December 2019 and was a member of the board of directors of Central European Media Enterprises from April 2014 to June 2018.  She received a J.D. degree from Ludwig-Maximilians-Universitaet and an L.L.M. degree from New York University.

Qualifications: Ms. Knobloch was selected to be a director of Lazard because of her Continental European perspective from her leadership positions in multi-national businesses, and her experience in strategy, digital media, and emerging markets.

Philip A. Laskawy

Age: 79 years

Independent Director

Director since July 2008

Committees:

•  Audit (Chair)

•  Compensation

Philip A. Laskawy served as Chairman and Chief Executive Officer of Ernst & Young from 1994 until his retirement in 2001, after 40 years of service with the professional services firm. Mr. Laskawy served as Chairman of the International Accounting Standards Board from 2006 to 2007, and as a member of the 1999 Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. Mr. Laskawy is chairman of the board of directors of Covetrus, Inc., lead director of Henry Schein, Inc., and a member of the board of directors of Loews Corp.  

Qualifications: Mr. Laskawy was selected to be a director of Lazard because of his expertise in the areas of auditing and accounting, his qualifications as an “audit committee financial expert” and the unique perspective he brings as a former chief executive of a major professional services firm.

•

presiding at meetings of the Board in the absence of the Chairman, including the executive sessions of the independent members of the Board, and providing feedback to the CEO, other senior executives and key managing directors, as appropriate, from such executive sessions of the independent directors;

•

for the purpose of facilitating timely communication, serving as a liaison between (1) the independent directors (including committee chairpersons) and (2) the CEO, other senior executives and, in consultation with the CEO, key managing directors regarding significant matters (without impeding or replacing direct communication between the CEO and other directors or between or among other directors);

•

with input from the other independent directors, (1) reviewing and approving Board meeting schedules, as well as the agendas for such meetings and (2) calling meetings of the independent directors and setting the agendas in connection with such meetings;

•

together with the Board, providing oversight and advice to the CEO regarding corporate strategy, direction and implementation of initiatives;

•

in consultation with the CEO, identifying and supporting talented individuals within the Company;

•

being available for consultation or direct communication with significant shareholders;

•

together with the Compensation Committee, conducting periodic performance appraisals of the CEO;

•

coordinating the activities of the chairpersons of Board committees; and

•

performing such other duties as the Board may from time to time delegate to the Lead Director.

Prepare

Our Board monitors and assesses

•   Performance and outlook

•   Strategy and growth opportunities

•   Investment and capital return

•   Investor ownership trends

•   Governance best practices

Engage

Executive management is proactive

•   Meets with investment community regularly to discuss market trends, performance and outlook

•   Provides two-way dialogue to deepen insights and augment perception

Respond

Our Board and executive management identify and implement enhancements

•   Transparency and disclosure practices

•   Team and viewpoint refreshment

•   Long-term focus throughout economic cycles

Evaluate

Shareholder perspective

•   Investment themes, market sentiment, changes in risk profile

•   Economic and macro background

•   Fundamental and relative performance

•   Shareholder voting results

We highly value engagement with our shareholders and maintain an active dialogue through individual and small group meetings as well as participation in investment conferences. We engage with our shareholders and potential investors throughout the year on a wide variety of topics, such as business strategy, market conditions, financial performance, competitive landscape, capital allocation, regulatory and governance changes, and environmental and social responsibility.

In 2020, our shareholder engagement transitioned to a virtual format following the onset of the global COVID-19 pandemic.  Despite the restrictions placed on travel and meetings, our engagement with our shareholders continued at a consistent pace, although the ability to meet new investors and build relationships was impacted in some respects by the unprecedented and critical situation.  We have seen widespread adoption of virtual meeting formats and believe this method of interaction will become more normal course of business, facilitating even more extensive engagement, while the eventual easing of travel restrictions should enable us to incorporate more in person introductory meetings over time.

Topic Discussed

Our Response

Long-Term Performance Metric Alignment with Shareholder Value

In order to better align NEO compensation with the actual experience of our shareholders, we have enhanced the performance metrics applicable to our long-term incentive awards granted in February 2021 in respect of 2020 compensation to include a modifier based on our total shareholder return relative to the S&P 1500, or relative TSR.  Additionally, we have implemented a post-investment operating margin metric, which we refer to as PI-OMM, and post-investment capital return ratio, which we refer to as PI-CRR, which are enhancements to the Capital Return Ratio, or CRR, and Operating Margin Metric, or OMM, to ensure that our metrics support our long-term strategic objectives, which include making investments in our business to drive profitable growth and continuing our focus on returning excess capital to shareholders. We also removed volatility adjusted revenue growth ratio (VARGR) as a metric to simplify the program and to recognize that recent M&A activity in our industry has limited the universe of appropriate peers to which we can compare ourselves for the purposes of calculating the VARGR result.

Annual Banking of Awards

Historically, 25% of the total target number of shares of Class A common stock subject to the applicable long-term performance-based equity incentive award would no longer be at risk based on achievement of the performance criteria in a given year. The Compensation Committee has eliminated this feature. As a result of this change, in the case of our long-term incentive awards granted in February 2021 in respect of 2020 compensation, long-term performance-based equity incentive awards remain subject to full risk of forfeiture until the end of the three-year performance period, regardless of the achievement of interim results, further aligning the interests of our NEOs with those of our shareholders.

Peer Benchmarking

Lazard’s selected peer group reflects the competitive market for talent in which we compete, and we aim to align compensation within this group.  We believe other peer groups generated by broad industry categorization and market capitalization do not accurately reflect the businesses and competitive market for intellectual talent in which we operate, and the value of our alignment of employee interests with shareholder value through our compensation program.  Shareholder feedback on this topic was supportive of our methodology and results, and recognized that our unique combination of business, size and global footprint mean that we have few direct peers.  However, we continually assess our peer groups and adapt as companies, markets and other situations evolve.

Topic Discussed

Our Response

Equity Compensation Dilution

We are committed to buying back shares to offset the potentially dilutive impact of equity compensation each year and have done so each year since 2012.  Our fully diluted share count has declined 14% from year-end 2017 and we have a share repurchase authorization to continue our practice of offsetting the potentially dilutive impact of equity compensation, and to purchase shares in excess of the shares granted annually.  Shareholder feedback on this topic noted that the burn rate calculated by some methodologies is above a broad sector industry average.  We believe this is due to the nature of (1) our cost structure in which our employees are our greatest asset and thus compensation is the largest component of our expenses and (2) our compensation structure which prioritizes shareholder alignment and long-term value creation through the use of equity-based compensation.  Our demonstrated history of offsetting the potentially dilutive impact of the equity component of our compensation programs is an important aspect of our equity compensation practices and most shareholders are supportive of maintaining our stock-based compensation program. We believe these practices reflect a responsible approach to equity compensation.

Annual Incentive Awards

Our annual incentive compensation reflects the achievement of Company goals and individual contributions of our management team toward these goals, which are described for each NEO under the section titled “2020 Compensation for Each of Our NEOs—Compensation Decisions”.  Consistent with competitive market practice in our industry, the Compensation Committee establishes annual incentive compensation based on a rigorous assessment of performance and, in the case of the CEO, his performance in reference to goals and objectives set during the year.  This approach allows us to balance the objective, pre-established elements of our compensation program with the need to tailor overall compensation in a given fiscal year to reflect particular circumstances and appropriately incentivize our NEOs.  

Shareholder feedback on this topic reflected an understanding of market practice in the financial services industry, our rigorous overall compensation program and the inclusion of qualitative factors on a short-term basis while maintaining discipline in our long-term compensation program overall.

Board Committees

AUDIT COMMITTEE

COMPENSATION COMMITTEE

Members:

Philip A. Laskawy (Chair)

Andrew M. Alper

Steven J. Heyer

Jane L. Mendillo

Michelle Jarrard

Meetings in 2020: 5

Members:

Andrew M. Alper (Chair)

Steven J. Heyer

Michelle Jarrard

Iris Knobloch

Philip A. Laskawy

Richard D. Parsons

Meetings in 2020: 9

Primary Responsibilities:

The Audit Committee assists our Board of Directors in fulfilling its oversight responsibilities with respect to:

•   monitoring the integrity of our financial statements;

•   assessing the qualifications, independence and performance of our independent auditor;

•   evaluating the performance of our internal audit function;

•   reviewing the Company’s major financial risk exposures and the steps taken to monitor and control such exposures; and  

•   monitoring the Company’s compliance with certain legal and regulatory requirements.

The Audit Committee also selects and oversees Lazard’s independent auditor, and pre-approves all services to be performed by the independent auditor pursuant to the Audit Committee pre-approval policy.

All members of the Audit Committee are independent as required by Lazard and the listing standards of the NYSE.

All members of the Audit Committee are financially literate, as determined by the Board of Directors. The Board of Directors has determined that Mr. Laskawy has the requisite qualifications to satisfy the SEC’s definition of “audit committee financial expert”.

Primary Responsibilities:

The Compensation Committee assists the Board of Directors by overseeing our firm-wide compensation plans, policies and programs and has full authority to:

•   determine and approve the compensation of our CEO;

•   review and approve the compensation of our other executive officers;

•   review our compensation programs as they affect all managing directors and employees; and

•   administer the 2018 Plan, the Lazard Ltd 2008 Incentive Compensation Plan, or the 2008 Plan, and any successor plans.

All members of the Compensation Committee are independent as required by Lazard and the listing standards of the NYSE.

From time to time the Compensation Committee has established special equity award pools pursuant to the 2018 Plan for the express purpose of granting awards to new hires and, under certain circumstances, retention awards to key employees (other than our executive officers). The Compensation Committee granted to our CEO (or his designee) authority to determine the amount, terms and conditions of all awards made from these pools and required that the Compensation Committee be updated on all such awards at regularly scheduled meetings.

The Compensation Committee directly engaged Compensation Advisory Partners, or CAP, an independent compensation consulting firm, to assist it with various compensation analyses, as well as to provide consulting on executive compensation practices and determinations, including information on equity-based award design. CAP generally attends meetings of the Compensation Committee. In addition, Kenneth M. Jacobs, our CEO, generally attends meetings of the Compensation Committee and expresses his views on the Company’s overall compensation philosophy. Following year end, Mr. Jacobs makes recommendations to the Compensation Committee as to the total compensation package (salary, annual cash incentive and long-term incentive compensation awards) to be paid to each of the other executive officers.

NOMINATING & GOVERNANCE COMMITTEE

WORKPLACE AND CULTURE COMMITTEE

Members:

Steven J. Heyer (Chair)

Richard N. Haass

Sylvia Jay

Iris Knobloch

Richard D. Parsons

Meetings in 2020: 5

Members:

Richard D. Parsons (Chair)

Richard N. Haass

Michelle Jarrard

Sylvia Jay

Jane L. Mendillo

Meetings in 2020: 3

Primary Responsibilities:

The Nominating & Governance Committee assists our Board of Directors in promoting sound corporate governance principles and practices by:

•   leading the Board in an annual review of its own performance;

•   identifying individuals qualified to become Board members, consistent with criteria approved by the Board;

•   recommending to the Board the director nominees for the next annual general meeting of shareholders;

•   recommending to the Board director nominees for each committee of the Board;

•   recommending to the Board compensation of non-executive directors; and

•   reviewing and reassessing the adequacy of the Corporate Governance Guidelines.

The Nominating & Governance Committee also is responsible for recommending to the Board of Directors standards regarding the independence of non-executive directors and reviewing such standards on a regular basis to confirm that such standards remain consistent with sound corporate governance practices and with any legal, regulatory or NYSE requirements. All members of the Nominating & Governance Committee are independent as required by Lazard and the listing standards of the NYSE.

Primary Responsibilities:

The Workplace and Culture Committee assists and advises management in continuing to cultivate and reinforce a workplace culture that helps attract, motivate and retain talented people, allows them to thrive, fosters productivity and professional and personal development, values diversity and inclusion, and encourages its people to engage with each other and their communities by:

•   overseeing efforts by management to communicate, promote and embed principles integral to a workplace culture that attracts, motivates and retains the best people;

•   periodically discussing with management the development, implementation and effectiveness of the Company’s policies and strategies relating to workplace culture; and

•   reviewing efforts by management to enhance diversity and inclusion in the Company’s workforce, including at management levels.

All members of the Workplace and Culture Committee are independent.

Annual Process

is Initiated

The Nominating & Governance Committee initiates the annual evaluation process by reviewing and updating the self-assessment process and approving the director self-evaluation questionnaires.

Individual Director Evaluations & Self-Assessments

Each director completes an annual self-evaluation questionnaire to help evaluate whether the Board and each director are functioning effectively, including with respect to its interaction with management, and to provide an opportunity to reflect upon and improve the Board’s policies, procedures, and structure.

One-On-One Director Interviews

At the direction of the Nominating & Governance Committee, private interviews are periodically conducted with individual directors to discuss feedback.

Review by Nominating & Governance Committee

The results of the director self-evaluation questionnaires are compiled and anonymized, then shared with the Nominating & Governance committee, which reviews and discusses the evaluations and highlights key areas for further discussion, reflection and improvement.

Presentation

of Findings

The Nominating & Governance Committee presents its findings to the full Board for discussion and feedback. Based on these findings, the Board assesses the overall effectiveness of the Board and identifies possible areas for further consideration and improvement.

Feedback

Incorporated

In response to feedback solicited from the Board, the Nominating & Governance Committee discusses areas of focus for improvement and works with management and the Board committees to develop appropriate action plans. Recent areas identified for continued consideration include instituting a new term limit policy for independent directors, refreshing required director qualifications, reassessing the board structure and enhancing the focus of materials presented to the Board and its Committees.

➊

➋

➌

➍

Candidate

Recommendation

Nominating & Governance Committee

Board of Directors

Shareholders

As part of its regular review and recommendation process, the Nominating & Governance Committee will consider candidates recommended by the Board, by management and by shareholders.

The Nominating & Governance Committee evaluates candidates to ensure requisite experience, dedication, and integrity. The committee also considers the interplay of a candidate’s experience with that of other Board members, the needs of the Company, as well as other factors it deems appropriate, including, among other things, diversity and inclusion.

After candidates are recommended by the Nominating & Governance Committee, the Board evaluates each candidate, taking into consideration the needs of the Board, including independence requirements.

Our Board is committed to nominating the best candidates for election by our shareholders, who have the opportunity to elect three candidates to serve as directors at the 2021 Annual General Meetings of Shareholders.

The Company continuously seeks to bring fresh perspectives to the board, demonstrated by the implementation of a new term limit policy for independent directors, nominating a new independent director this year and electing four other new directors within the past five years.

Directors

Fees Earned or

Paid in Cash

Stock

Awards (1)

Total

Andrew M. Alper (2)

$

144,053

$

176,014

$

320,067

Richard N. Haass (2)

$

139,564

$

170,507

$

310,071

Steven J. Heyer (2)

$

150,802

$

184,260

$

335,062

Michelle Jarrard

$

142,198

$

179,772

$

321,970

Sylvia Jay

$

139,500

$

170,507

$

310,007

Iris Knobloch

$

139,500

$

170,507

$

310,007

Philip A. Laskawy

$

146,250

$

178,753

$

325,003

Jane L. Mendillo (2)

$

141,831

$

173,274

$

315,105

Richard D. Parsons (2)

$

171,058

$

209,025

$

380,083

(1)

The value of the DSUs reported in the table above is based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. See Note 16 of Notes to the Consolidated Financial Statements contained in our 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for a discussion of the assumptions used in the valuation of the DSUs. The number and grant date fair value of DSUs granted on June 1, 2020 under FASB ASC Topic 718 (based on the NYSE closing price of our Class A common stock on the trading day immediately preceding the date of the grant) were as follows: Mr. Alper, 6,553, valued at $176,014; Dr. Haass, 6,348, valued at $170,507; Mr. Heyer, 6,860, valued at $184,260; Ms. Jarrard, 6,348, valued at $170,507; Lady Jay, 6,348, valued at $170,507; Ms. Knobloch, 6,348, valued at $170,507; Mr. Laskawy, 6,655, valued at $178,753; Ms. Mendillo, 6,451, valued at $173,274; and Mr. Parsons, 7,782, valued at $209,025. In addition, following her appointment to the Audit Committee effective July 29, 2020, Ms. Jarrard received a pro-rated grant of 329 DSUs, valued at $9,265.  The total number of DSUs held by each of the non-executive directors as of December 31, 2020 was as follows: Mr. Alper, 57,137; Dr. Haass, 36,025; Mr. Heyer, 121,966; Ms. Jarrard, 20,358; Lady Jay, 62,129; Ms. Knobloch, 15,225; Mr. Laskawy, 58,829; Ms. Mendillo, 39,658; and Mr. Parsons, 67,473.

(2)

Each of Messrs. Alper, Haass, Heyer and Parsons and Ms. Mendillo elected to defer all or a portion of their quarterly cash compensation into additional DSUs pursuant to the terms of the Directors Fee Deferral Unit Plan during 2020.  The number and grant date fair value of DSUs in lieu of cash (based on the NYSE closing price of our Class A common stock on the trading days immediately preceding the applicable grant dates) were as follows: Mr. Alper, 4,396, valued at $144,053; Dr. Haass, 4,259, valued at $139,564; Mr. Heyer, 4,602, valued at $150,802; Ms. Mendillo, 4,328, valued at $141,831; and Mr. Parsons, 5,220, valued at $171,058.  In accordance with SEC guidance, these amounts are reflected in the “Fees Earned or Paid in Cash” column, rather than in the “Stock Awards” column.

Name and Address

of Beneficial Owner

Number of Shares

of Class A

Common Stock

Beneficially Owned

Percentage of Shares

of Class A

Common Stock

Beneficially Owned

Percentage

of Voting

Power (1)

FMR LLC (2)

8,338,864

7.39

%

7.77

%

245 Summer Street

Boston, MA 02210

The Vanguard Group (3)

8,862,541

7.86

%

8.26

%

100 Vanguard Blvd.

Malvern, PA 19355

T. Rowe Price Associates, Inc. (4)

7,458,523

6.61

%

6.95

%

100 East Pratt Street

Baltimore, MD 21202

Ariel Investments, LLC (5)

5,541,371

4.91

%

5.16

%

200 East Randolph Street, Ste. 2900

Chicago, IL 60601

(1)

For purposes of this calculation, the voting power of our Class A common stock excludes 5,422,578 shares held by the Company’s subsidiaries as of March 4, 2021.

(2)

Shares of our Class A common stock beneficially owned by FMR LLC are based on a Schedule 13G that was filed on February 8, 2021.

(3)

Shares of our Class A common stock beneficially owned by The Vanguard Group are based on a Schedule 13G that was filed on February 10, 2021.

(4)

Shares of our Class A common stock beneficially owned by T. Rowe Price Associates, Inc. are based on a Schedule 13G that was filed on February 16, 2021.

(5)

Shares of our Class A common stock beneficially owned by Ariel Investments, LLC are based on a Schedule 13G that was filed on February 12, 2021.

Name of Beneficial Owner

Shares of Class A

Common Stock

(assuming

conversion of

applicable

equity awards)

(1) (2)

Percentage of

Class A Common

Stock

Percentage

of Voting

Power (3)

Kenneth M. Jacobs (4)

2,154,861

1.91

%

2.01

%

Ann-Kristin Achleitner

—

*

*

Andrew M. Alper

57,996

*

*

Ashish Bhutani

712,430

*

*

Richard N. Haass

38,057

*

*

Steven J. Heyer

122,866

*

*

Michelle Jarrard

20,358

*

*

Sylvia Jay

62,129

*

*

Iris Knobloch

15,225

*

*

Philip A. Laskawy

61,829

*

*

Jane L. Mendillo

41,904

*

*

Richard D. Parsons

68,493

*

*

Peter R. Orszag

7,561

*

*

Evan L. Russo (5)

114,497

*

*

Alexander F. Stern

217,577

*

*

All directors and executive officers as a group

   (17 persons) (6)

3,837,313

3.40

%

3.57

%

*

Less than 1% beneficially owned.

(1)

Performance-based restricted stock units, or PRSUs, performance-based profits interest participation rights, which we refer to as performance-based restricted participation units, or PRPUs, which, together with PRSUs, we refer to as Performance Restricted Units, or PRUs, restricted stock units, or RSUs, and other equity incentive awards granted to our executive officers that vest more than 60 days after March 4, 2021 have not been included in the table above in accordance with SEC rules. For a discussion of equity awards that have been granted to our NEOs, see “Compensation of Executive Officers—Outstanding Equity Awards at 2020 Fiscal Year-End” below.

(2)

This column also includes shares of our Class A common stock that are subject to issuance in the future with respect to the DSUs issued to our non-executive directors in the following aggregate amounts: Mr. Alper, 57,996 shares; Dr. Haass, 36,857 shares; Mr. Heyer, 122,866 shares; Ms. Jarrard, 20,358 shares; Lady Jay, 62,129 shares; Ms. Knobloch, 15,225 shares; Mr. Laskawy, 58,829 shares; Ms. Mendillo, 40,504 shares; and Mr. Parsons, 68,493 shares. These DSUs convert to shares of our Class A common stock on a one-for-one basis only after a director resigns from, or otherwise ceases to be a member of, the Board. See “Director Compensation for 2020” above.

(3)

For purposes of this calculation, the voting power of our Class A common stock excludes 5,422,578 shares held by the Company’s subsidiaries as of March 4, 2021.

(4)

Includes 584,279 shares of our Class A common stock indirectly beneficially owned by Mr. Jacobs in trust.

(5)

Includes 83,493 shares of our Class A common stock indirectly beneficially owned by Mr. Russo in trust.

(6)

Our executive officers also hold interests in LGACo 1 LLC, a Delaware series limited liability company, which is the sponsor and holder of certain equity interests in Lazard Growth Acquisition Corp. I (Nasdaq: LGACU), a newly organized blank check company, incorporated as a Cayman Islands exempted company.  In addition, one of our non-executive directors has an indirect beneficial ownership interest in 2,000 units of Lazard Growth Acquisition Corp. I.

The Board recommends that you vote FOR the following resolution:

2020

2019

Operating Revenue⁽¹⁾

$

2,524

$

2,546

% Growth

(1)%

(8)%

Awarded Compensation Expense⁽¹⁾

$

1,510

$

1,469

% of Operating Revenue

59.8%

57.7%

Adjusted Non-Compensation Expense⁽¹⁾

$

432

$

499

% of Operating Revenue

17.1%

19.6%

Operating Income (based on Awarded Compensation Expense)⁽²⁾

$

582

$

578

% Growth

1%

(21)%

Operating Margin (based on Awarded Compensation Expense)⁽³⁾

23.1%

22.7%

Earnings from Operations⁽¹⁾

$

590

$

583

% Growth

1%

(23)%

Operating Margin (based on Earnings from Operations)⁽⁴⁾

23.4%

22.9%

Return of Capital⁽⁵⁾

$

365

$

850

Net Income, as adjusted⁽⁶⁾

$

410

$

385

% Growth

7%

(29)%

Per Share, diluted⁽⁶⁾

$

3.60

$

3.28

Ending Assets under Management ($ in billions)

$

259

$

248

% Growth

4%

15%

Total Shareholder Return (CAGR) (1-Year)⁽⁷⁾

12%

15%

Total Shareholder Return (CAGR) (3-Year)⁽⁷⁾

(1)%

5%

✓

Prioritized employee health and safety: transitioned employees to remote working and implemented office safety protocols

✓

Prudently managed our capital, consistently returning capital through quarterly dividends and share repurchases while maintaining investment grade balance sheet

✓

Implemented virtual engagement opportunities for employees, including town halls, remote training sessions and group events

✓

Conducted virtual summer internships and onboarded newly recruited employees remotely

✓

Heightened caregiver support and wellness communications in light of the pandemic with a focus on mental health

✓

Encouraged continued community engagement among our employees, including through virtual events with local organizations and donation matching campaigns

•

Total 2020 compensation awarded to our CEO remained flat compared to 2019. Our Compensation Committee considered the following factors in determining our CEO’s total compensation for 2020:

▪

our strong financial performance in 2020, as reflected in the 2020 financial highlights described above, in the context of a global pandemic and associated global macroeconomic conditions and, in particular, our strong results in the second half of 2020;  

▪

the continued achievement of our financial goals described in this Proxy Statement;

▪

our CEO’s active engagement throughout the pandemic and management of business operations through the crisis, including his extraordinary leadership in managing the sudden transition to a remote work environment necessary to protect employee health and safety, proving the value of the Company’s investments in technology infrastructure;

▪

through our CEO’s leadership, the Company’s continued cultivation of a workplace culture that fosters productivity and professional and personal development, and values diversity and inclusion, while successfully attracting, retaining and motivating valuable professionals;  

▪

our continued active communication with shareholders and the analyst community regarding our strategic plan, initiatives for profitable growth and ESG efforts through the publication of the CSR, and dedication to strengthening our outreach efforts and enhancing investor awareness of the Company’s business model, strategic objectives and accomplishments;

▪

our CEO’s individual contributions toward client relationships and activities in support of our Financial Advisory business;

▪

our CEO’s active role in the recruitment of key professionals across our businesses and the development of new investment strategies in our Asset Management business; and

▪

our CEO’s leadership in maintaining and fostering a culture of cost discipline throughout the firm, reaffirming our commitment to cost control.

•

Approximately 86% to 91% of the total 2020 compensation of each NEO who served as an executive officer throughout 2020 was awarded in the form of performance-based compensation. As further discussed under “2020 Compensation for Each of Our NEOs” below, our Compensation Committee granted this compensation after evaluating each such NEO’s performance in light of our financial results, including our achievement of the goals described above and each such NEO’s individual contributions to our strong performance during 2020, and, in the case of our CEO, his performance in reference to goals and objectives set by the Compensation Committee during the year.

•

Approximately 70% of total 2020 compensation awarded to Mr. Jacobs, and at least 50% of total 2020 compensation awarded to Messrs. Russo, Bhutani and Stern, was awarded in the form of at-risk PRPUs, which were granted in February 2021. PRPUs vest three years after the grant date contingent upon the achievement of three-year forward-looking performance goals, the satisfaction of service and other vesting conditions, and the achievement of a minimum value condition, which we refer to as the Minimum Value Condition, based on an amount of economic appreciation in the assets of Lazard Group.

•

As demonstrated by our compensation practices in 2020, we remain committed to our goals regarding firm-wide awarded compensation expense. We have maintained discipline in respect of compensation costs and applied a consistent compensation deferral policy for our NEOs and other employees.

•

Say on Pay Support.  Historically, our shareholders have expressed strong support for our compensation programs, and we received over 95% approval for our shareholder advisory vote regarding executive compensation from 2015 through 2019.  In April 2020, 78.9% of our shareholders voted in favor of our shareholder advisory vote.  In response to shareholder feedback, our Compensation Committee has reassessed and enhanced our compensation programs accordingly.

•

2020 Shareholder Outreach.  We conducted outreach with approximately 80% of our institutional shareholders.

•

Introduction of Enhanced Performance Metrics.  In order to better align NEO compensation with the actual experience of our shareholders, we have enhanced the performance metrics applicable to our long-term incentive awards granted in February 2021 in respect of 2020 compensation to include a modifier based on our total shareholder return relative to the S&P 1500, or relative TSR.  Additionally, we have implemented a post-investment operating margin metric, which we refer to as PI-OMM, and post-investment capital return ratio, which we refer to as PI-CRR, which are refinements to the Capital Return Ratio, or CRR, and Operating Margin Metric, or OMM, to ensure that our metrics support our long-term strategic objectives, which include making investments in our business to drive profitable growth and continuing our focus on returning excess capital to shareholders. We removed volatility adjusted revenue growth ratio (VARGR) as a metric to simplify the program and to recognize that recent M&A activity in our industry has limited the universe of appropriate peers to which we can compare ourselves for the purposes of calculating the VARGR result. The addition of a relative TSR modifier in light of the elimination of the VARGR metric ensures that the 2021 PRPUs granted in respect of 2020 performance continue to have a relative performance component, and one that we believe more appropriately incentivizes our NEOs to invest in our business over time and improves their alignment with shareholder interests.

•

Removed Annual Banking of Awards.  Historically, 25% of the total target number of shares of Class A common stock subject to the applicable performance-based equity incentive award would no longer be at risk based on achievement of the performance criteria in a given year. The Compensation Committee has eliminated this feature. As a result of this change, in the case of our long-term incentive awards granted in February 2021 in respect of 2020 compensation, all shares of our Class A common stock subject to the award remain subject to full risk of forfeiture until the end of the three-year performance period, regardless of the achievement of interim results, further aligning the interests of our NEOs with those of our shareholders.

•

Corporate Governance Improvements—Board Refreshment.  We introduced a new board tenure policy for non-executive directors to ensure differing skills and perspectives are represented on the Board, resulting in the nomination of a new independent director for election and two of our directors not seeking re-election at our 2021 Annual General Meeting.

•

We prudently invest in human capital, throughout the cycle. Our compensation programs focus on retaining and attracting proven senior professionals who have strong client relationships, valuable industry expertise and demonstrated money management skills, and who understand our culture and the needs of our business. Our Compensation Committee is committed to awarding these individuals levels of compensation that are commensurate with the value that they bring to the Company and appropriate in light of competitive compensation considerations.

•

Our compensation programs help to effectively retain our human capital. We believe our overall levels of compensation, as well as the structure of our long-term incentive awards, have helped us successfully retain and motivate our NEOs and other key employees. We believe our compensation policy has been effective, enabling us to retain and attract key people and resulting in low voluntary attrition.

•

Most of the compensation we pay is based on performance. Compensation for each of our NEOs, managing directors and other senior professionals is viewed on a total compensation basis and then subdivided into two primary categories: base salary and incentive compensation dependent upon performance. Our performance-based incentive compensation awards, which we award annually, generally include cash incentives, Performance Restricted Units, or PRUs, profits interest participation rights, restricted stock units, or RSUs, restricted shares of our Class A common stock, or restricted stock, and Lazard Fund Interests, or LFIs. In February 2021, as in prior years, we applied a progressive formula based on total compensation for all of our NEOs, managing directors and senior professionals. Pursuant to this formula, as a recipient’s total compensation (salary, annual cash incentives and long-term incentive compensation) increases, a greater percentage of his or her total compensation is composed of long-term incentive awards. This formula is based on a sliding scale that effectively begins at 4% for some of our vice presidents and directors and generally reaches 70% (or 50% in our Asset Management business) for our highest paid managing directors.

•

Incentive compensation can be highly variable from year to year. Incentive compensation is awarded based on our financial results in the immediately preceding fiscal year, as well as each individual’s contribution to those results and to the Company’s development, including business segment performance. We also consider competitive compensation practices in the financial services industry, as well as the views of our shareholders.

•

We grant at-risk, forward-looking, performance-based long-term incentive awards. The Compensation Committee has adopted a long-term incentive program under which it grants at-risk performance-based awards to our NEOs that are based on three-year forward-looking performance metrics and that could involve potential payouts equal to zero.

•

We grant long-term awards with multi-year vesting horizons. By subjecting our long-term equity awards to service-based and other vesting conditions, they help to retain our NEOs and employees, giving shareholders the stability of highly productive, experienced management and employees who help to perpetuate our strong firm culture.  Additionally, PRUs, RSUs, profits interest participation rights, restricted stock and LFIs awarded to our NEOs, as applicable, and employees align the interests of our NEOs and employees with the interests of our shareholders – and link the value of these awards to performance – as the value that each individual realizes upon vesting depends:

▪

for PRUs, RSUs, profits interest participation rights and restricted stock, on the long-term performance of our Class A common stock;

▪

for PRUs, on the performance of our business as measured against specific performance goals; and

▪

for LFIs, on the performance of investment funds managed by our Asset Management business.

What We Do

✓  Pay for Performance. We tie pay to performance. A greater percentage of our NEO compensation is performance-based than is typical in our industry.  Other than base salaries, none of our NEOs’ compensation for their service as executive officers during 2020 was guaranteed. We review financial results and goals for the Company, as well as individual achievement, in determining NEO compensation.  In the case of our CEO, we also review his performance in reference to goals and objectives set by the Compensation Committee during the year. We grant performance-based equity awards, including awards based on transparent, objective, three-year forward-looking performance metrics.

✓  Apply Multi-Year Vesting to Equity Awards. Performance-based equity awards granted to our NEOs vest approximately three years after the grant date, assuming satisfaction of the performance goals and the service and other applicable conditions.

✓  Utilize Stock Ownership Guidelines. We have clear stock ownership guidelines, which all of our NEOs exceed. In addition, our directors receive a majority of their annual compensation in the form of DSUs which remain invested in the Company until the director leaves our Board.

✓  Employ Clawback and Anti-Hedging Policies. We have a compensation clawback policy applicable to our executive officers and an anti-hedging policy applicable to our executive officers, directors and employees.

✓  Lead Director and a High Proportion of Independent Directors. Over 80% of the current members of our Board of Directors are independent, and all members of the Committees of the Board of Directors, including the Compensation Committee, are independent directors. In addition, our Board of Directors has a strong, active and independent Lead Director.

✓  Retain an Independent Compensation Consultant. Our Compensation Committee consults with CAP, its independent compensation consultant.  CAP performs no work for the Company other than advising the Compensation Committee with respect to executive officer compensation and the Nominating & Governance Committee with respect to director compensation.  The Compensation Committee has concluded that none of CAP’s work to date has raised any conflicts of interest.

✓  Annual Shareholder Advisory Vote regarding Executive Compensation. As demonstrated by our actions, the Compensation Committee strongly considers the results of the vote and feedback provided by shareholders as part of its annual assessment of our compensation programs.

✓  Engage in Shareholder Outreach. We proactively engage with our shareholders and other interested parties to discuss our compensation programs and objectives.

✓  Utilize a Structured NEO Compensation Process. Our Compensation Committee employs a structured evaluation and decision-making process, which involves a focus on the Company’s financial results, the Company’s progress regarding key strategic metrics and each NEO’s individual contributions to our performance during the fiscal year.  

✓  Mitigate Undue Risk. We do not believe that our compensation programs create risks that are reasonably likely to have a material adverse effect on the Company.

✓  Offset Equity Award Dilution. We monitor the potentially dilutive impact of the equity component of our compensation programs and seek to offset that impact by repurchasing shares of our Class A common stock, as we have since 2012.

What We Don’t Do

X  No Banking of Awards. In the case of awards granted in 2021 in respect of 2020 performance, all awards remain subject to full risk of forfeiture until the end of the applicable three-year performance period, regardless of the achievement of interim results.

X  No Single-Trigger Vesting. Year-end equity-based incentive awards granted to our NEOs do not automatically vest upon a change in control.

X  No Excise Tax Gross-Ups Upon Change in Control. We do not provide excise tax gross-ups to our NEOs in connection with change in control payments.

X  No Enhanced Change in Control Severance. We do not provide enhanced severance to our NEOs if they are terminated in connection with a change in control.

X  No Guaranteed Bonuses. Other than base salaries, which have remained unchanged for over nine years, none of our NEOs’ compensation for their service as executive officers during 2020 was guaranteed. Instead, all such compensation was at risk based on performance.

X  No Hedging Transactions or Short Sales. We prohibit our executive officers, directors and employees from entering into hedging transactions or short sales in respect of our Class A common stock.

Element

Purpose

Description

Base Salary

Provide a predictable level of income that is competitive with the market for each NEO’s role

•   None of our NEOs received base salary increases in 2020. Our NEOs’ base salaries have not changed for over nine years

•   Represent a limited percentage of 2020 total compensation (i.e., 9% for our CEO and 9-14% for our other NEOs)

Annual Incentive Compensation: Cash Incentives⁽¹⁾

Provide annual incentive compensation that is reflective of Company and individual performance

•   The Compensation Committee determines annual cash incentives for our NEOs based on a review of the Company, business segment (in the case of the CEOs of LAM and Financial Advisory) and individual performance based on a rigorous assessment of performance and, in the case of our CEO, his performance in reference to goals and objectives set during the year

•   The review is holistic and aims to deliver compensation that is reflective of Company performance and shareholder outcomes, thereby achieving a balance between the objective, pre-established elements of our compensation program attributable to our long-term incentive awards with the need to tailor overall compensation in a given fiscal year to reflect particular circumstances and appropriately incentivize our NEOs, consistent with competitive market practice in our industry

Long-Term Incentive Compensation: Performance-Based Restricted Participation Units (PRPUs)⁽¹⁾

Align a significant portion of our NEOs’ incentive compensation with Lazard’s long-term strategy, including making investments in our business to drive profitable growth and continuing our focus on returning excess capital to shareholders, and shareholder value creation

•   Reflects a greater portion of total compensation than is typical in our industry

•   Payout determined formulaically based on Lazard’s performance relative to pre-established three-year goals

•   Initial payout can be 0-2x the target number of shares based on Lazard’s performance on two equally weighted performance metrics: post-investment operating margin metric (PI-OMM) and post-investment capital return ratio (PI-CRR)

•   Final payout modified 0.8x – 1.2x based on Lazard’s total shareholder return (TSR) relative to the S&P 1500

•   Payouts can only be above 2x the target number of shares if Lazard’s TSR is above the 60^th percentile of the S&P 1500

(1)

Reflects incentive compensation program for our CEO, CFO, and President. The compensation of the heads of our two principal business segments, Asset Management and Financial Advisory, differed in certain respects from that of our other NEOs whose job responsibilities relate to our entire organization.  Specifically, the CEO of Lazard Asset Management also received a deferred cash award for 2020 and the CEO of Lazard Financial Advisory received a special cash retention award for 2020 and profits interest participation rights instead of PRPUs because he became an executive officer toward the end of 2020.

•

Base salaries are approved by our Compensation Committee and have remained unchanged for over nine years. During 2020, each of our NEOs who served as an executive officer of the Company throughout the fiscal year was a party to a retention agreement or employment agreement with the Company that provided for a minimum annual base salary during the term of the agreement. Base salaries for our NEOs and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, after consultation with its independent compensation consultant. For 2020, the Compensation Committee once again determined to maintain base salaries at the minimum level set forth in the retention agreements.

•

Base salaries are the only component of our NEOs’ compensation that is not tied to performance.

•

Base salaries represent a small proportion of total NEO compensation.

•

PRPU awards are performance-based awards that support the generation of shareholder value by aligning the long-term interests of our NEOs with those of our shareholders. Because the amount an individual realizes upon the vesting of PRPUs directly depends on the performance of our

business, as well as the value of our Class A common stock and, in the case of PRPUs granted in February 2021 in respect of 2020 performance, our TSR relative to the S&P 1500, each individual who receives a PRPU award becomes, economically, a long-term shareholder of the Company, with interests aligned with the interests of other shareholders.

•

PRPU awards subject the NEOs to risk of total loss of a critical component of annual compensation. PRPU awards enhance our risk-based long-term incentive compensation programs by subjecting a substantial proportion of the total compensation payable to each of the NEOs who served as executive officers of the Company throughout the relevant fiscal year (approximately 70% of the 2020 compensation for our CEO and 50%-70% of the 2020 compensation for our other NEOs who received PRPUs) to full risk of loss based upon the long-term future financial performance of our business, measured against objective, pre-established performance goals, as well as the achievement of the Minimum Value Condition.

•

PRPU awards advance our goal of implementing transparent compensation practices. The performance metrics that must be satisfied in order for PRPUs to vest are tied to factors that we consider to be critical measures of our success and our ability to build value for our shareholders. Importantly, virtually all of the financial information regarding the Company that is used in measuring the Company’s performance with respect to these metrics is available to shareholders, including through our year-end earnings releases. PRPUs allow our shareholders to know, in advance, how this substantial component of compensation for the NEOs will be measured and paid.

•

PRPU awards look to pre-established metrics of the Company’s performance and link payout directly to scores awarded for such metrics. The number of shares of our Class A common stock that a recipient will realize upon vesting of a PRPU award will be calculated by reference to metrics that were chosen because they are indicative of the Company’s overall performance, rather than individual performance, both on an absolute and for those granted in 2019 and 2020, a relative basis. These metrics rely on criteria such as returns to shareholders, operating margin and, with respect to awards granted in 2019 and 2020, revenue growth. At the measurement times, each of the metrics is assigned a score based on our performance. Such scores are generally weighted evenly over the performance period, with the ultimate level of payout for the awards determined by reference to the weighted numeric score, subject in the case of a total score above 2.0 to downward adjustments, as described below (and, in respect of PRPUs granted in 2021, subject to further upward or downward adjustment after applying the relative TSR modifier).

•

Payouts under PRPU awards will depend on long-term performance and could be equal to zero. The target number of shares of our Class A common stock subject to each PRPU is one. Based on the achievement of performance criteria, as determined by the Compensation Committee, the number of shares of our Class A common stock that may be received in connection with each PRPU award will range from zero to two times the target number (or, after applying a relative TSR modifier in the case of PRPUs granted in 2021, such PRPUs will be subject to further upward or downward adjustment).

•

Payouts under historical PRPU awards are determined, in part, by reference to the performance of our peers. As further discussed below, the financial metrics used to calculate payouts under PRPU awards granted prior to 2021 include a measure that evaluates our performance relative to our peers. By including this measure, our Compensation Committee intended that our performance be judged, in part, against what our competitor companies were able to accomplish under the same general market conditions during the performance period. The addition of a relative TSR modifier in the context of the elimination of the VARGR metric ensures that the 2021 PRPUs granted in respect of 2020 performance continue to have a relative performance component, and one that we believe more appropriately incentivizes our NEOs to invest in our business over time.

•

PRPU awards also include restrictive covenants and other terms and conditions. In February 2019, 2020 and 2021, PRPUs were granted to each of our NEOs who served as executive officers of the Company throughout the relevant fiscal year and in February 2021, profits interest participation

rights were granted to Mr. Orszag. The number of shares of our Class A common stock that are subject to these PRPU and profits interest participation right awards was determined in the same way that the number was derived for all of our employees, by dividing the dollar amount allocated to be granted to the NEO as a PRPU or profits interest participation right award (at the target payout level, in the case of PRPUs), as applicable, by the average NYSE closing price of our Class A common stock over four consecutive trading days ending on the grant date. In exchange for their PRPU or and profits interest participation right awards, as applicable, our NEOs agreed to restrictions on their ability to compete with the Company and to solicit our clients and employees, which protect the Company’s intellectual and human capital.

•

PRPUs are allocated income, subject to vesting, in respect of dividends on our Class A common stock. In the event we declare cash dividends on our Class A common stock during the performance period for PRPUs, subject to satisfying the performance conditions and other relevant vesting criteria, our NEOs will be allocated income in respect of such dividends on a pro rata basis as if the PRPUs were exchanged for our Class A common stock, based on the extent to which performance conditions are actually achieved. In addition, from the date that the applicable dividend is paid to holders of our Class A common stock until the time of payment to the PRPU holder, unpaid distributions are credited with interest. The holder of PRPUs will receive distributions necessary to pay related taxes on the income allocations, but otherwise is not entitled to any amounts in respect of such allocations until applicable vesting conditions in respect of such PRPUs have been satisfied.

•

PRPUs advance our pay-for-performance paradigm. By coupling the potential value of the PRPUs with our degree of financial success, we believe we have created another strong link between value realized by our shareholders and value to the relevant NEOs. Each NEO who served as an NEO since the beginning of a fiscal year knows—at the beginning of a fiscal year—that the year is a component of three-year, forward-looking PRPU (or previously-granted PRSU) performance measurement periods and that the NEO’s compensation under the awards will be determined in part based on the Company’s performance during that fiscal year. Each such NEO is updated at least annually on our performance with respect to the applicable performance metrics.

Step 1:

For each year during the performance period, we first calculate post-investment capital returned to shareholders, which we generally define for this purpose as (A) the aggregate value of dividends paid to our shareholders during the year, plus (B) the aggregate amount of funds used for equity repurchases during the year, plus (C) the value of our Class A common stock withheld for tax purposes during the year upon vesting of equity-based awards, plus (D) cash held for planned return of capital to our shareholders or expected investments in the first six months of the following year (excluding the year in which such cash is actually deployed, to avoid double counting) and all cash held for strategic reasons.

Step 2:

For the same year, we calculate our cash flow during the year, which we generally define for this purpose as (A) our net income for the year, calculated in the adjusted manner set forth in our annual earnings release for the year (primarily to enhance comparability between periods), plus (B) the amortization expense arising from year-end equity-based and LFI awards recorded during the year, plus (C) aggregate cash proceeds received from any new equity or debt issuances, other than with respect to an acquisition during the year, plus (D) depreciation and amortization of capitalized property during the such year, minus (E) the value of amounts used to fund investments relating to LFI awards during the year, minus (F) amounts used during the year to reduce outstanding debt, minus (G) pension contributions made during the year, minus (H) acquisition-related payments made during the year, minus (I) non-recurring charges incurred during the year, minus (J) any capitalized investments in property during the year, minus (K) increases to seed investments or other investments during the year.

Step 3:

We establish our PI-CRR for the entire three-year performance period by dividing (A) the sum of the amounts obtained in Step 1 for each year in the performance period by (B) the sum of the amounts obtained in Step 2 for each year in the performance period.

Lazard PI-CRR

PI-CRR Score

PI-CRR < 65%

0.00

PI-CRR = 65%

0.50

PI-CRR = 75%

1.00

PI-CRR = 85%

1.60

PI-CRR > 95%

2.25

Step 1:

For each year during the performance period, we first calculate our awarded operating income for the year, net of certain items, which for this purpose is calculated as (A) our operating revenue for the year, minus (B) our awarded compensation expense and our adjusted non-compensation expense for the year, in each case adjusted to exclude the net of: (i) notional compensation awarded to newly-hired managing director, director and senior vice president employees (including any benefits and any sign-on, “make-whole” and special awards) in the year of hire and the immediately succeeding year, including any such employees acquired in connection with acquisition-related activities; plus (ii) severance paid to managing director, director and senior vice president employees in the year of payment; plus (iii) recruiting and other costs related to the hiring of managing director, director and senior vice president employees; plus (iv) adjustments for new business initiatives and other long-term investments made through compensation or non-compensation expense, but not covered by clauses (i) or (ii) above; and less (v) a portion of the notional compensation that will no longer be paid due to senior level employee changes, ordinary turnover and restructurings.

Step 2:

We divide the value obtained in Step 1 above by our operating revenue for the relevant year. The result is our PI-OMM for the relevant year.

Step 3:

We establish our PI-OMM for the entire three-year performance period by dividing (A) the sum of the amounts obtained in Step 1 for each year in the performance period by (B) the sum of our operating revenue for each year in the performance period. We may exclude the results for a given year in the event of an economic shock in that year where there is both (i) a decline of 15% or more in our operating revenue for the relevant year and (2) a decline of 10% or more in the operating revenue for such year of three or more of our peer companies.

Lazard PI-OMM

PI-OMM Score

PI-OMM ≤ 15%

0.00

PI-OMM = 17%

0.50

PI-OMM = 19%

0.75

PI-OMM = 21%

1.00

PI-OMM = 23%

1.75

PI-OMM = 25%

2.00

PI-OMM > 27%

2.25

Company’s TSR Relative to the S&P 1500

Award Modifier

<20th Percentile

0.8x

=20^th Percentile ≤ 60th Percentile

1.0x

>80th Percentile

1.2x

•

Evaluation of Fiscal Year 2020 Performance for PRUs Granted in 2020 and 2019 with Respect to 2019 and 2018 Compensation, Respectively. In early 2021, the Compensation Committee evaluated the Company’s performance for 2020 with respect to VARGR, CRR and OMM with respect to the PRUs awarded in 2020 with respect to 2019 compensation. In addition, the Compensation Committee evaluated the Company’s performance for 2020 with respect to VARGR, CRR and AOM with respect to the PRUs awarded in 2019 with respect to 2018 compensation. The Compensation Committee determined that the Company’s performance on the applicable metrics exceeded an aggregate score of 1.0 for 2020 for the PRUs awarded with respect to 2019 and 2018 compensation. Accordingly, pursuant to the banking feature eliminated by the Compensation Committee beginning with awards granted in 2021 with respect to 2020 compensation, 25% of the total target number of shares of our Class A common stock underlying the PRUs awarded to the NEOs with respect to 2019 and 2018 compensation are not subject to further achievement of performance goals. A similar determination was made by the Compensation Committee in early 2020 in respect of the Company’s performance for 2019 on the three applicable metrics and, in early 2020, 25% of the total target number of shares of our Class A common stock underlying the PRUs awarded in 2019 with respect to 2018 compensation similarly were no longer subject to further achievement of performance goals. However, all of these PRUs remain subject to service-based or other vesting criteria that would be satisfied on or around March 1, 2023, in the case of the PRUs granted in 2020 with respect to 2019 compensation, and on or around March 1, 2022, in the case of the PRUs granted in 2019 with respect to 2018 compensation (and the total payout with respect to such PRUs could increase based on the Company’s performance over the relevant three-year performance period). The portion of performance-based equity awards that have not been subject to the scoring determinations described above remain subject to performance-based vesting criteria and to full risk of forfeiture if the applicable performance goals are not achieved. Based on the feedback we received, including as a result of our shareholder outreach, for 2020 compensation, the Compensation Committee eliminated this one-year performance assessment from PRPUs granted in February 2021 in respect of 2020 compensation.  As a result of this change, in the case of such PRPUs, all shares of our Class A common stock subject to the award remain subject to full risk of forfeiture until the end of the three-year performance period regardless of the achievement of interim results, further aligning the interests of our NEOs with those of our shareholders.

•

Evaluation of Three-Year Performance for PRUs Granted in 2018 with Respect to 2017 Compensation. In addition, in early 2021, the Compensation Committee evaluated the Company’s performance during the period from January 1, 2018 to December 31, 2020 with respect to the PRUs awarded in 2018 in respect of 2017 compensation. The Compensation Committee determined by formula that an aggregate score of 1.75, which is less than the maximum potential score of 2.00, applied to the PRUs awarded to the NEOs for 2017 compensation and, accordingly, the corresponding number of shares of our Class A common stock subject to such awards were no longer subject to such performance goals. All of these PRUs awarded in 2018 with respect to 2017 compensation vested on March 1, 2021.

•

Adjustments Related to COVID-19.  In early 2021, the Compensation Committee evaluated the Company’s performance during 2020 in light of the COVID-19 pandemic. The Compensation Committee determined to make an adjustment to the OMM scoring for 2020 to neutralize the unanticipated impact of COVID-19 on our financial results. Specifically, the Committee determined to normalize revenue and expenses in light of the COVID-19 pandemic, including by using average 2017-2019 revenue, adding back expenses that would typically be incurred but were not due to the pandemic such as travel and entertainment expenses, and excluding additional COVID-19 related expenses (in each case, based on average 2017-2019 expenses). This approach is intended to use operating revenue that is reflective of a more typical operating environment, recognizing that the impact of COVID-19 on the Company’s operating revenue was outside of our officers’ control and

that, in consultation with us, our officers avoided taking near-term cost-cutting actions that might have improved operating margin for 2020 but may have been detrimental to long-term shareholder value.

•

Our Compensation Committee Approves NEO Compensation Utilizing a Structured Decision-Making Process. The Compensation Committee determines the total compensation package to be awarded to our CEO, Mr. Jacobs. Mr. Jacobs makes recommendations to the Compensation Committee as to the total compensation package to be awarded to our other NEOs. The Compensation Committee reviews and approves the total compensation package to be paid to our other NEOs and considers Mr. Jacobs’ recommendations in its review, employing a structured evaluation and decision-making process, which involves a focus on the Company’s financial results and progress regarding key strategic metrics (and, in the case of the CEOs of LAM and Financial Advisory, the financial results and progress regarding key strategic metrics of the applicable business segment) as well as each NEO’s individual contributions to our performance during the fiscal year. In addition, in the case of Mr. Jacobs, the Compensation Committee also considers his performance in reference to goals and objectives set during the year. Mr. Jacobs reviewed with the Compensation Committee the performance of each of the other NEOs individually and their overall contribution to the Company in 2020. Mr. Jacobs does not participate in sessions of the Compensation Committee at which his own compensation is determined; however, he does participate in sessions at which the compensation of the other NEOs is discussed.

•

An illustration of the process used by the Compensation Committee for 2020 compensation decisions is set forth on the following page.

Review Business Performance

Key Metrics

•   Achievement of Pre-Defined Goals, including Long-Term Financial Goals and Key Metrics Selected by Compensation Committee

Operating Margin

Return of Capital / Capital Management Cost Discipline and Initiatives

•   Corporate and Business Segment Performance and Economic Conditions

See “Selected Consolidated Financial Information’’ above

Below Par

Par

Above Par

•   Review competitive pay ranges, considering median peer data and market outlook

•   Consider market conditions

•   Review recent trends

•   Consider pay mix for each position

•   Develop reference pay ranges for each position and compare to the overall performance result (Below Par I Par I Above Par)

•   Determine compensation for each NEO, considering position-specific reference pay range based on Company and individual results, and progress against Company and business segment, as appropriate, strategic objectives (described above)

•   Determine performance-based compensation mix (cash incentive vs. long-term incentive) for each NEO based on market trends, historical practice and other information

•

Business Performance. In evaluating the total compensation packages awarded to our NEOs, the Compensation Committee considered the factors described under “2020 Business Strategy and Performance Highlights” above, as well as each NEO’s individual contributions to the Company, the leadership, guidance, and other individual qualities that they bring to the Company, their desire to advance the implementation of compensation discipline throughout the firm including with respect to NEO compensation.

•

Achievement of Financial Goals. We have articulated financial goals to our shareholders, including goals regarding our awarded compensation ratio, our adjusted non-compensation ratio and our return of capital strategy. We remained focused on these goals throughout 2020 and, in 2020, we once again achieved these goals. Since 2012, the Compensation Committee has reviewed the Company’s

progress with respect to these and other goals in determining the total compensation packages awarded to our NEOs and has considered that progress in connection with compensation decisions.

•

Financial Metrics. The Compensation Committee reviewed a variety of metrics relating to the Company’s financial performance in evaluating the total compensation packages to be awarded to our NEOs. The Compensation Committee considered the Company’s results and progress during 2020 regarding key strategic metrics, including operating revenue, awarded compensation, operating margin, cost savings and return of capital. The Compensation Committee also considered the Company’s relative TSR.

•

Tally Sheets. The Compensation Committee reviewed a comprehensive tally sheet of all elements of each NEO’s compensation. The tally sheets included information on cash and non-cash compensation for the past three fiscal years (including current and prior year base salaries, annual cash incentives, deferred cash awards, special awards (if any), PRPUs, PRSUs, profits interest participation rights, RSUs, restricted stock and LFIs, if any), and the value of benefits and other perquisites paid to our NEOs, as well as potential amounts to be delivered under post-employment scenarios.

•

Competitive Compensation Considerations. The competition to attract and retain high-performing executives and professionals in the financial services industry is intense, and the amount and composition of total compensation paid to our executives must be considered in light of competitive compensation levels. In this regard, for our NEOs, the Compensation Committee reviewed an analysis prepared by CAP regarding compensation levels for 2019 (the most recent year for which comprehensive data for our peers was available), and indicative trends for 2020 year-end compensation decisions, for comparable positions at the following financial services firms: Affiliated Managers Group Inc., Blackstone Group LP, Eaton Vance Corp., Evercore Partners Inc., Greenhill & Co., Inc., Invesco Ltd, Legg Mason, Inc., Raymond James, Stifel Financial and T. Rowe Price.

(1)

Financial data from S&P Capital IQ.

(2)

Eaton Vance was acquired by Morgan Stanley in 2021 and Legg Mason was acquired by Franklin Templeton in 2020.

•

our strong financial performance in 2020, as reflected in the 2020 financial highlights described above, in the context of a global pandemic and associated global macroeconomic conditions and, in particular, our strong results in the second half of 2020;  

•

the continued achievement of our financial goals described in this Proxy Statement;

•

our CEO’s active engagement throughout the pandemic and management of business operations through the crisis, including his extraordinary leadership in managing the sudden transition to a

remote work environment necessary to protect employee health and safety, proving the value of the Company’s investments in technology infrastructure;

•

through our CEO’s leadership, the Company’s continued cultivation of a workplace culture that fosters productivity and professional and personal development, and values diversity and inclusion, while successfully attracting, retaining and motivating valuable professionals;

•

the Company continued to actively communicate with shareholders and the analyst community regarding its strategic plan, initiatives for profitable growth and ESG efforts through the publication of the CSR, and remained dedicated to strengthening its outreach efforts and enhancing investor awareness of the Company’s business model, strategic objectives and accomplishments;

•

our CEO’s individual contributions toward client relationships and activities in support of our Financial Advisory business;

•

our CEO’s active role in the recruitment of key professionals across our businesses and the development of new investment strategies in our Asset Management business; and

•

the Company maintained and continued to foster its culture of cost discipline throughout the firm, once again proving its commitment to compensation cost control.

•

by showing the notional value of the PRPUs (assuming payout at the target level) and, in the case of Mr. Orszag, profits interest participation rights granted in February 2021, which related to 2020 performance but are not reflected in the Summary Compensation Table for 2020 because they were granted after the end of our 2020 fiscal year;

•

by excluding the grant date fair value, as determined for accounting purposes, of the PRPUs (assuming payout at the target level) which related to 2019 performance and are included in the Summary Compensation Table for 2020 because they were granted after the end of our 2019 fiscal year;

•

by excluding the values reported in the “Change in Pension Value” and “All Other Compensation” columns, because they are not tied to the NEO’s performance for the applicable year; and

•

by distinguishing deferred cash awards paid to Mr. Bhutani and special cash retention awards paid to Mr. Orszag from annual cash incentive amounts, as these awards were not paid at the same time as our regular annual cash incentives but rather were paid at a later date, subject to continued employment through the relevant date.

Special

Profits

Annual

Deferred

Cash

Interest

Target

Cash

Cash

Retention

Participation

Performance

Total

Year

Salary

Incentive

Awards

Award

Rights

Awards

Compensation

Kenneth M. Jacobs

2020

$

900,000

$

2,100,000

—

—

—

$

7,000,000

$

10,000,000

2019

$

900,000

$