Form DEF 14A Lazard Ltd For: Apr 29

March 16, 2021 5:29 PM EDT

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Information Required in Proxy Statement

Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission

Definitive Proxy Statement

 

Only (as permitted by Rule 14a-6(e)(2))

Definitive Additional Materials

 

 

Soliciting Material Pursuant to § 240.14a-12

 

 

 

Lazard Ltd

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notice of Annual

Meeting and

Proxy Statement

 

 

 

 

 

 

 

 

 

2021 Annual General Meeting of Shareholders

 

 

 

 


 

 

 

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/

 

Items of Business

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.

Only shareholders of record at the close of business on March 4, 2021 may vote by attending the virtual meeting or by proxy at the meeting or any adjournment or postponement thereof.

Proxy Statement and Other Materials

The Proxy Statement is being first sent to shareholders on or about March 16, 2021, together with a copy of the Company’s 2020 Annual Report, which includes financial statements for the period ended December 31, 2020 and the related independent auditor’s reports. Those financial statements will be presented at the meeting.

Your vote is important. Please exercise your shareholder right to vote.

 

By order of the Board of Directors,

 

Scott D. Hoffman

Chief Administrative Officer, General Counsel

and Secretary

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

Proxy Statement Summary

1

Voting Matters and Board Recommendations

1

2020 Financial Highlights

1

Corporate Governance Highlights

2

Shareholder Engagement and Corporate Sustainability Highlights

4

Executive Compensation Highlights

6

 

 

Item 1

 

Election of Directors

8

Information About the Director Nominees and Continuing Directors

9

Majority Vote Policy

13

 

 

Information Regarding the
Board of Directors and
Corporate Governance

14

Leadership Structure

14

Shareholder Engagement

16

Shareholder Feedback on Executive Compensation

17

Corporate Sustainability Report

19

Board Committees

20

Risk Oversight

22

Codes of Business Conduct and Ethics

22

Communications with the Board

22

Board Evaluation Process

23

Policy on Director Qualifications and Nomination Process

24

Director Independence

25

Director Compensation for 2020

25

Beneficial Owners of More than 5% of Our Common Stock

27

Beneficial Ownership of Directors and Executive Officers

28

Item 2

 

Advisory Vote Regarding Executive Compensation

29

 

 

Compensation Discussion and Analysis

29

2020 Business Strategy and
Performance Highlights

30

Selected 2020 Compensation Highlights

31

Key Enhancements and Refinements to Our Compensation Program

32

Our Compensation Philosophy and Objectives

33

2020 Compensation for Each of Our NEOs

43

 

 

Executive Compensation Tables

55

CEO Pay Ratio

69

Certain Relationships and Related Transactions

69

 

 

Item 3

 

Approval of the 2018 Incentive Compensation Plan Amendment

72

Reasons to Vote for the Amendment

73

2018 Plan Use and Net Burn Rate

76

Summary of the 2018 Plan

78

 

 

Item 4

 

Ratification of the Appointment of Deloitte & Touche LLP

86

 

 

Shareholder Proposals and Nominations for the 2022 Annual General Meeting

89

 

 

General Information

90

 

 

Annex A

 

Standards of Director Independence

A-1

 

 

Annex B

 

2018 Incentive Compensation Plan Amendment

B-1

 

 

 

 

 

 

 


 

 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement or in our Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2020, or the 2020 Annual Report. This summary does not contain all the information you should consider, and you should read the entire Proxy Statement carefully before voting. In this Proxy Statement, the terms “we”, “our”, “us”, the “firm”, “Lazard” or the “Company” refer to Lazard Ltd and its subsidiaries, including Lazard Group LLC.

Voting Matters and Board Recommendations

The following table summarizes the matters to be voted upon at our 2021 Annual General Meeting of Shareholders and the Board of Directors’ voting recommendations with respect to each matter.

 

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

 

2020 Financial Highlights

 

 

 

 

 

 

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

 

 

 

 

 

 

For definitions of the financial measures used above, see endnotes to the section titled “Compensation Discussion and Analysis”, which are located on page 54 of this Proxy Statement.

 

Page 1


Proxy Statement Summary | Corporate Governance Highlights

 

 

Corporate Governance Highlights

We are committed to the highest standards of corporate governance that serve the best interests of our Company and stakeholders, and to active engagement with our shareholders throughout the year. We believe our ongoing engagement with shareholders helps us achieve balanced and appropriate solutions for the oversight and management of our business. The following table summarizes certain highlights of our corporate governance practices and policies.

 

 

 

 

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

 

 

 

Page 2


Proxy Statement Summary | Corporate Governance Highlights

 

 

 

Our Board of Directors and Its Committees

 

 

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

Our Leadership Structure

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.

 

Page 3


Proxy Statement Summary | Corporate Governance Highlights

 

 

 

Board Independence

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.

Shareholder Engagement and Corporate Sustainability Highlights

Shareholder Engagement

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.

Corporate Sustainability

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

 

Page 4


Proxy Statement Summary | Corporate Governance Highlights

 

 

 

 

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.

 

Page 5


Proxy Statement Summary | Executive Compensation Highlights

 

 

 

 

Executive Compensation Highlights

We encourage our shareholders to review the section titled “Compensation Discussion and Analysis” below for a comprehensive discussion of our executive compensation for 2020.

Our Compensation Philosophy

 

 

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

 

Our NEO Compensation Program Design

 

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 

 

Our CEO’s 2020 Compensation: Flat compared to 2019

 

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

 

 

 

Page 6


Proxy Statement Summary | Executive Compensation Highlights

 

 

Compensation Committee Considerations for Our CEO’s 2020 Compensation

Total 2020 compensation awarded to our CEO was 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.

 

 

 

 

 

 

Page 7


 

 

ITEM 1

ELECTION OF DIRECTORS

Our Board of Directors is divided into three classes. Members of each class serve for a three-year term. Shareholders elect one class of directors at each annual general meeting. At this annual general meeting, shareholders will vote on the election of the three nominees described below for a term ending at the 2024 annual general meeting.

The following section contains information provided by the nominees and continuing directors about their principal occupation, business experience and other matters. Messrs. Alper and Bhutani are current directors of the Company. Prof. Dr. Dr. Achleitner was recommended to the Nominating & Governance Committee for consideration as a nominee by one of our directors. Each nominee has indicated to us that he or she will serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy may be voted for another person nominated by the Board. In accordance with the Board’s recently adopted policy on term limits for independent directors, current directors Steven J. Heyer and Sylvia Jay are not standing for reelection when their terms expire at our 2021 Annual General Meeting.

 

Director Attributes Anticipated Following our 2021 Annual General Meeting

 

 

 

 

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

 

BOARD OF DIRECTORS’ RECOMMENDATION

 

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

Unless otherwise directed in the proxy, the persons named in the proxy will vote FOR each nominee listed below.

 

Page 8


Item 1: Election of Directors | Nominees for Election

 

 

Nominees for Election as Directors for A Three-Year Term Expiring In 2024

 

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.

 

 

Page 9


Item 1: Election of Directors | Nominees for Election

 

 

Directors Continuing in Office

(Term Expiring in 2022)

 

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.

 

Page 10


Item 1: Election of Directors | Nominees for Election

 

 

 

Directors Continuing in Office

(Term Expiring in 2023)

 

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.

 

Page 11


Item 1: Election of Directors | Nominees for Election

 

 

 

 

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.

 

 

 

Page 12


Item 1: Election of Directors | Majority Vote Policy

 

 

 

Majority Vote Policy

Our Board has adopted a majority vote policy in connection with the election of directors.

In an uncontested election of directors, any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will, within five days following the certification of the shareholder vote, tender his or her written resignation to the Chairman of the Board for consideration by the Nominating & Governance Committee. As used herein, an “uncontested election of directors” is an election in which the number of nominees is not greater than the number of Board seats open for election.

The Nominating & Governance Committee will consider such tendered resignation and, promptly following the date of the shareholders’ meeting at which the election occurred, will make a recommendation to the Board concerning the acceptance or rejection of such resignation. In determining its recommendation to the Board, the Nominating & Governance Committee will consider all factors deemed relevant by the members of the Nominating & Governance Committee including, without limitation, the stated reason or reasons why shareholders who cast “withhold” votes for the director did so, the qualifications of the director (including, for example, the impact the director’s resignation would have on the Company’s compliance with the requirements of the SEC, the NYSE and Bermuda law), and whether the director’s resignation from the Board would be in the best interests of the Company and its shareholders.

The Nominating & Governance Committee also will consider a range of possible alternatives concerning the director’s tendered resignation as members of the Nominating & Governance Committee deem appropriate including, without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by the Nominating & Governance Committee to have substantially resulted in the “withheld” votes.

The Board will take formal action on the Nominating & Governance Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting at which the election occurred. In considering the Nominating & Governance Committee’s recommendation, the Board will consider the information, factors and alternatives considered by the Nominating & Governance Committee and such additional information, factors and alternatives as the Board deems relevant.

Following the Board’s decision on the Nominating & Governance Committee’s recommendation, the Company will promptly disclose, in a Form 8-K filed with the Securities and Exchange Commission, the Board’s decision, together with an explanation of the process by which the decision was made. If the Board has not accepted the tendered resignation, it will also disclose the reason or reasons for doing so.

No director who, in accordance with this policy, is required to tender his or her resignation, shall participate in the Nominating & Governance Committee’s deliberations or recommendation, or in the Board’s deliberations or determination, with respect to accepting or rejecting his or her resignation as a director.

 

 

 

 

Page 13


 

 

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Lazard is governed by a Board of Directors and various committees of the Board that meet throughout the year. Our Board has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating & Governance Committee and the Workplace and Culture Committee. Each of the standing committees has adopted and operates under a written charter, all of which are available on our website at www.lazard.com/investorrelations/. Other corporate governance documents also are available on our website, including our Corporate Governance Guidelines and our Code of Business Conduct and Ethics. A copy of each of these documents is available to any shareholder upon request.

Leadership Structure

Chairman and Chief Executive Officer

Kenneth M. Jacobs has served as Chairman of the Board and CEO of the Company since November 2009. The Board carefully considered a variety of governance arrangements following the sudden death of the Company’s former Chairman and CEO in October 2009, including separating the roles of Chairman and CEO. The Board appointed Mr. Jacobs as the Company’s Chairman and CEO following this measured and comprehensive review. At the same time, the Board also recognized the need for strong independent perspectives to balance the combined Chairman and CEO positions and to avoid any potential conflicts. The Board created the Lead Director position in November 2009 to provide this balance.

The Board believes that the Company and its shareholders are best served by maintaining the flexibility to have either the same individual serve as Chairman and CEO or to separate those positions based on what is in the best interests of the Company and its shareholders at a given point in time. The Board believes that the members of the Board possess considerable experience, breadth of skills and unique knowledge of the challenges and the opportunities the Company faces and that the Board is best positioned to identify the person who has the skill and commitment to be an effective Chairman.

The Board believes there is no single best organizational model that is the most effective in all circumstances, and the Board retains the right to separate the positions of Chairman and CEO if it deems it appropriate in the future.

Lead Director

Mr. Parsons was originally appointed as the Lead Director for the Board in February 2018. Mr. Parsons’s appointment was reconfirmed by the independent members of the Board in February 2019, 2020 and 2021.  Mr. Parsons is a strong, independent and active director with clearly defined leadership authority and responsibilities. In addition to his role as Lead Director, Mr. Parsons serves as Chair of the Workplace and Culture Committee and as a member of the Compensation Committee and the Nominating & Governance Committee.

 

Page 14


Information Regarding the Board of Directors and Corporate Governance | Leadership Structure

 

 

The responsibilities and duties of the Lead Director include the following:

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.

Our Lead Director also presides at meetings of the Board, or the relevant portions of such meetings, when it would not be appropriate for our Chairman and CEO to preside.

The Board believes Mr. Jacobs serving as Chairman and CEO and Mr. Parsons serving as a separate and independent Lead Director provides the most effective leadership for the Company at the present time, offers an appropriate balance between the roles and provides a satisfactory counterbalance to the combined role of Chairman and CEO.

 

 

 

 

Page 15


Information Regarding the Board of Directors and Corporate Governance | Shareholder Engagement

 

 

 

Shareholder Engagement

 

 

 

 

 

 

 

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.

 

 

We conduct significant outreach each year following the distribution of our annual proxy.  We value our shareholders’ opinions and continually take into consideration their feedback as part of our ongoing evaluation of our executive compensation programs. Our strong foundation of shareholder engagement has resulted in a history of implementing changes over the years based on shareholder feedback, such as recently implementing a tenure policy for independent directors that enhances Board refreshment by limiting independent directors to serving four complete terms (in addition to any partial term), and making significant enhancements to the performance metrics applicable to our NEOs in order to better align their compensation with shareholder benefits.

 

Page 16


Information Regarding the Board of Directors and Corporate Governance | Shareholder Feedback on Executive Compensation

 

 

Shareholder Feedback on Executive Compensation

After more than five years of strong (95%+) shareholder support on our advisory vote regarding executive compensation, we received just under 80% support at our 2020 Annual General Meeting of Shareholders.

As it does every year, our Compensation Committee has focused on the feedback received from shareholders regarding executive compensation-related matters during our outreach in 2020, which included outreach to approximately 80% of our institutional shareholders. Shareholder feedback, as well as feedback from other parties, was reviewed by the Compensation Committee in making its pay determinations in respect of 2020 compensation.  A summary of the key areas of the feedback we received and our response is provided in the chart below.

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.

 

Page 17


Information Regarding the Board of Directors and Corporate Governance | Shareholder Feedback on Executive Compensation

 

 

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.

 

 

 

 

 

 

Page 18


Information Regarding the Board of Directors and Corporate Governance | Corporate Sustainability Report

 

 

 

Corporate Sustainability Report:  Creating Value Responsibly

Lazard published its second annual Corporate Sustainability Report in 2020, reporting on fiscal year 2019, which focuses on the core topics prioritized by our stakeholders–employees, clients, shareholders, business partners and communities. This voluntary disclosure provides a summary of the principles, programs and policies that reflect our commitment to a sustainable future. As a global firm that has advised clients on their most important financial matters during our more than 170-year history, the principles of sustainability are ingrained in Lazard’s culture and operations.

We are committed to serving our clients, developing our people and supporting our communities.  Our Board and management are focused on cultivating a workplace environment that attracts and retains exceptional talent and a diversity of perspectives.  Encouraging an engaged workplace where employees feel connected allows them to thrive personally and professionally.  

We recognize our business has an affect beyond the profits we generate. While we seek to generate value for our shareholders, we also seek to create long term societal value through our contributions to global economies, our reputation for innovation, our culture of quality and prudence, and our belief in generating a sustainable future for the next generation. As a global investor, we see the integration of sustainability considerations as an essential part of any long-term investment process. Companies and sovereign issuers that operate in a sustainable way, with a recognition of how their activities intersect with the environment and society, are likely to represent more attractive long-term investment opportunities. Those that do not, are at risk of structural decline as they become subject to regulatory, commercial, or financial pressure to change.

As a firm, we have developed the Guiding Principles of excellence, empowerment and engagement to help us to achieve the greatest impact for all Lazard stakeholders. These Guiding Principles reflect our distinctive culture and our aspirations for the future.  They have shaped our success in the past and point the way forward toward sustainable growth.

 

 

 

Page 19


Information Regarding the Board of Directors and Corporate Governance | Board Committees

 

 

 

 

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.

 

Page 20


Information Regarding the Board of Directors and Corporate Governance | Board Committees

 

 

 

 

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.

 

ATTENDANCE

The Board held seven meetings in 2020 and also met informally several times during 2020 to receive updates from our CEO regarding our response to the COVID-19 pandemic and its strategic, financial and employee health and safety implications. In 2020, overall attendance by our directors at meetings of the Board and its Committees averaged over 99%. Each such director attended at least 75% of the meetings of the Board and Committees on which he or she served (and that were held during the period for which he or she had been a director or Committee member, as applicable). In 2020, all of our directors attended the 2020 Annual General Meeting of Shareholders.


 

 

Page 21


Information Regarding the Board of Directors and Corporate Governance | Risk Oversight, Code of Business Conduct and Ethics, Communications with the Board

 

 

 

Risk Oversight

Management within each of Lazard’s operating locations is principally responsible for managing the risks within its respective business on a day-to-day basis. The Board, working together with the Audit Committee, reviews the Company’s risk profile and risk management strategies at regular intervals. Members of the Company’s finance team, led by the Chief Financial Officer and the Head of Risk Management, also review with the Audit Committee categories of risk the Company faces, including any risk concentrations, risk interrelationships and financial and cyber risk exposures, as well as the likelihood of occurrence, the potential impact of those risks and the steps management has taken to monitor, mitigate and control such exposures. The Company’s Chief Information Officer and Chief Information Security Officer also frequently participate in these reviews. Updates on risks deemed material to the Company are reviewed at regular meetings of the Audit Committee and reported to the full Board. In addition, the Compensation Committee reviews compensation programs for consistency and alignment with Lazard’s strategic goals, and in connection therewith reviews Lazard’s compensation practices to assess the risk that they will have a material adverse effect on the Company.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that is applicable to all directors, managing directors, officers and employees of Lazard and its subsidiaries and affiliates. We have also adopted a Supplement to the Code of Business Conduct and Ethics for certain other senior officers, including our Chief Executive Officer, Chief Financial Officer and principal accounting officer. Each of these codes is available on our website at www.lazard.com/investorrelations/. A print copy of each of these documents is available to any shareholder upon request. We intend to disclose amendments to, or waivers from, the Code of Business Conduct and Ethics, if any, on our website.

 

Communications with the Board

Anyone who wishes to send a communication to our non-executive directors as a group may do so by mail at the address listed below, and by marking the envelope, Attn: Non-Executive Directors of the Lazard Ltd Board of Directors.

Lazard Ltd

30 Rockefeller Plaza

New York, NY 10112

The Lazard Ltd Board of Directors

c/o the Corporate Secretary

These procedures are also posted on our website at www.lazard.com/investorrelations/.

 

 

 

Page 22


Information Regarding the Board of Directors and Corporate Governance | Board Evaluation Process

 

 

 

Board Evaluation Process

Our Board is committed to continually improving in all aspects of corporate governance and our Board and the individual directors regularly evaluate their own effectiveness and the effectiveness of the Board process. As part of that review, the Nominating & Governance Committee conducts an annual review in which each director completes a self-evaluation questionnaire to assess overall effectiveness, including with respect to strategic oversight, interactions with and evaluations of management, board culture, board structure and operation, governance policies and committee structure and composition. The results of these evaluations are aggregated and shared on an anonymous basis with the Nominating & Governance Committee, which then reviews and presents its findings to the full Board for discussion and feedback. Through this regular self-assessment, the Board identifies areas for further reflection and improvement and, as appropriate, updates or changes our existing practices. The Nominating & Governance Committee annually reviews, updates and approves the evaluation framework, including the director evaluation questionnaires, in light of changing conditions and shareholder interests.

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.

 

 

 

 

 

 

 

Page 23


Information Regarding the Board of Directors and Corporate Governance | Policy on Director Qualifications and Nomination Process

 

 

 

Policy on Director Qualifications and Nomination Process

The Board’s Nominating & Governance Committee is responsible for evaluating and recommending to the Board proposed nominees for election to the Board of Directors. As part of its process, the Nominating & Governance Committee will consider director candidates recommended for consideration by members of the Board, by management and by shareholders. It is the policy of the Nominating & Governance Committee to consider candidates recommended by shareholders in the same manner as other candidates. Candidates for the Board of Directors must be experienced, dedicated and meet the highest standards of ethics and integrity. All directors represent the interests of all shareholders, not just the interests of any particular shareholder, shareholder group or other constituency. The Nominating & Governance Committee periodically reviews with the Board the requisite skills and characteristics for new directors, taking into account the needs of Lazard and the composition of the Board as a whole. A majority of our directors must satisfy the independence requirements of both Lazard and the NYSE. Likewise, each member of the Audit Committee must be financially literate and at least one member must possess the requisite qualifications to satisfy the SEC’s definition of “audit committee financial expert”. Once a candidate is identified, the Nominating & Governance Committee will consider the candidate’s mix of skills and experience with businesses and other organizations of comparable size, as well as his or her reputation, background and time availability (in light of anticipated needs). The Nominating & Governance Committee also will consider the interplay of the candidate’s experience with the experience of other Board members, the extent to which the candidate would be a desirable addition to the Board and any committees of the Board and any other factors it deems appropriate, including, among other things, diversity and inclusion. The Nominating & Governance Committee views diversity and inclusion broadly, encompassing differing viewpoints, professional experience, industry background, education, geographical orientation and particular skill sets, as well as race and gender.

 

 

 

 

 

 

 

 

 

 

 

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.

 

Shareholders wishing to recommend to the Nominating & Governance Committee a candidate for director at our 2022 Annual General Meeting of Shareholders may do so by submitting in writing such candidate’s name, in compliance with the procedures of our Bye-laws, and along with the other information required by our Bye-laws, to the Secretary of our Board of Directors at: Lazard Ltd, Office of the Secretary, 30 Rockefeller Plaza, New York, New York 10112 between December 30, 2021 and January 29, 2022.

 

Page 24


Information Regarding the Board of Directors and Corporate Governance | Director Independence, Director Compensation For 2020

 

 

 

Director Independence  

Pursuant to the corporate governance listing standards of the NYSE, the Board of Directors has adopted standards for determining whether directors have material relationships with Lazard. The standards are set forth on Annex A to this Proxy Statement. Under these standards, a director employed by Lazard cannot be deemed to be an “independent director”, and consequently Messrs. Jacobs and Bhutani are not independent directors of Lazard.

The Board of Directors has determined that none of our other directors or director nominees have a material relationship with Lazard under the NYSE corporate governance listing standards and the Board of Directors’ standards for director independence and, accordingly, that each of our directors and director nominees (other than Messrs. Jacobs and Bhutani) is independent under the NYSE corporate governance listing standards.

In making its determination, the Board of Directors carefully considered the previously disclosed engagement of Lazard’s Financial Advisory business by Haymaker Acquisition Corp., of which Mr. Heyer was at the time the Chairman and Chief Executive Officer, in 2018. Pursuant to the engagement, Lazard provided financial advisory services to Haymaker Acquisition Corp. in connection with a business combination transaction and is entitled to receive aggregate fees of approximately $3 million. The Board of Directors noted that (i) the engagement terms were negotiated in the ordinary course of business on an arms-length basis, (ii) the revenue relating to the engagement is expected to be less than 1% of the gross revenue of both Lazard and Haymaker Acquisition Corp.’s successor in respect of any year for which payments would be made, and (iii) the engagement was pre-approved by the Nominating & Governance Committee.

 

Director Compensation for 2020

Directors who are officers of the Company do not receive any fees for their service as directors. In 2020, our directors’ compensation program provided that each of our non-executive directors would receive an annual cash retainer of $126,000 and an annual award of deferred stock units, or DSUs, with a grant date value of $154,000. An additional annual retainer was paid to the Lead Director and the chairs of each committee of the Board of Directors as follows: the Lead Director, $50,000; the chair of the Audit Committee, $30,000; the chair of the Nominating & Governance Committee, $20,000; the chair of the Compensation Committee, $20,000; and the chair of the Workplace and Culture Committee, $20,000. The other members of the Audit Committee were paid an additional annual retainer of $20,000, and the other members of the Nominating & Governance Committee, the Compensation Committee and the Workplace and Culture Committee were paid an additional annual retainer of $15,000, in respect of each applicable committee.  All additional annual retainers were payable 45% in cash and 55% in DSUs.

Cash compensation is paid out on a quarterly basis (on February 15, May 15, August 15 and November 15, or, in each case, the first business day thereafter), and the DSU awards described above are granted on an annual basis on June 1st of each year, or the first business day thereafter, except for initial pro-rated grants made to new directors upon their election or appointment to the Board of Directors, and to continuing directors upon their appointment to new Board Committees or positions. The number of DSUs granted is determined based on the NYSE closing price of our Class A common stock on the trading day immediately preceding the date of grant.

Non-executive directors may elect to receive additional DSUs in lieu of some or all of their cash compensation pursuant to the Directors Fee Deferral Unit Plan. DSUs awarded under this plan are granted on the same quarterly payment dates as cash compensation would have been received, and the number of DSUs is determined based on the NYSE closing price of our Class A common stock on the trading day immediately preceding the date of grant. Messrs. Alper, Haass, Heyer and Parsons and Ms. Mendillo elected to participate in this plan during 2020 and have each elected to continue to participate in this plan during 2021.

 

Page 25


Information Regarding the Board of Directors and Corporate Governance | Director Compensation for 2019

 

 

All DSUs awarded under these arrangements are converted to shares of our Class A common stock on a one-for-one basis and distributed to a director only after he or she resigns from, or otherwise ceases to be a member of, the Board of Directors. Dividend equivalent payments are made in respect of DSUs, which are paid in cash at the same rate and time that dividends are paid on shares of our Class A common stock.

The Nominating & Governance Committee regularly reviews our director compensation program.

The table below sets forth the compensation paid to our non-executive directors during 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

Page 26


Information Regarding the Board of Directors and Corporate Governance | Beneficial Ownership

 

 

 

Beneficial Owners of More Than 5% of Our Common Stock

Based on filings made under Section 13(d) and Section 13(g) of the Exchange Act, as of March 4, 2021, the only persons known by us to be beneficial owners of more than 5% of our Class A common stock were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

Page 27


Information Regarding the Board of Directors and Corporate Governance | Beneficial Ownership

 

 

 

Beneficial Ownership of Directors and Executive Officers

The following table shows the number of shares of our Class A common stock that each director, each NEO, and all directors and executive officers as a group have reported as owning beneficially, or otherwise having a pecuniary interest in, as of March 4, 2021 (including any equity awards which are scheduled to vest within 60 days of that date). To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The address for each listed person is c/o Lazard Ltd, 30 Rockefeller Plaza, New York, New York 10112.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

Page 28


 

 

ITEM 2

AN ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION

The Board is committed to compensation governance and recognizes the significant interest of shareholders in executive compensation matters. As a result of that commitment and in accordance with the requirements of Section 14A of the Exchange Act, we provide our shareholders annually with an opportunity to cast an advisory vote regarding the compensation of our NEOs as disclosed in this Proxy Statement.

As further discussed under “Compensation Discussion and Analysis” below, our Company performed well in 2020 and delivered strong results in the context of global macroeconomic conditions, particularly in the second half of the year. We believe that our compensation philosophy and discipline, as successfully implemented on a firm-wide basis by our NEOs during 2020, contributed to our performance.

As this is an advisory vote, the result will not be binding on the Board, although our Compensation Committee, which is comprised solely of independent directors, will carefully consider the outcome of the vote when evaluating the effectiveness of our compensation policies and practices.

BOARD OF DIRECTORS’ RECOMMENDATION

 

The Board recommends that you vote FOR the following resolution:

RESOLVED, that the shareholders of the Company vote on a non-binding, advisory basis FOR the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.

Unless otherwise directed in the proxy, the persons named in the proxy will vote FOR the foregoing resolution.

Compensation Discussion and Analysis

In addition to performing the roles and responsibilities described under “Information Regarding the Board of Directors and Corporate Governance—Compensation Committee” above, our Compensation Committee, which is comprised entirely of independent directors, determined the 2020 compensation of our NEOs: Kenneth M. Jacobs, Chairman and CEO; Evan L. Russo, Chief Financial Officer; Ashish Bhutani, CEO of LAM; Peter R. Orszag, CEO of Financial Advisory; and Alexander F. Stern, President.

 

Page 29


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

2020 Business Strategy and Performance Highlights

We seek to make investments in our business to drive profitable growth and we are continuing our focus on returning excess capital to shareholders.  As further discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2020, our Company performed well in 2020 and delivered strong results in the context of a global pandemic and associated global macroeconomic conditions. We believe that our compensation philosophy and discipline, as successfully implemented on a firm-wide basis by our NEOs during 2020, contributed to our performance. Our Compensation Committee focused, among other things, on the following selected consolidated financial information in evaluating the performance of our NEOs and setting their performance-based compensation—that is, all compensation beyond their base salaries—for 2020.

Selected Consolidated Financial Information

($ in millions, other than per share information and as otherwise noted)

 

 

 

 

 

 

 

 

 

 

 

 

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%

 

Endnotes to this Compensation Discussion and Analysis are located on page 54.

Our Response to COVID-19

Our CEO and senior management team took decisive action at the outset of the pandemic to support our employees and enable us to continue to serve our clients at the highest level, while also continuing to execute on our business strategy. Our people were able to adapt quickly to the situation, reflecting the strength of the business and our management team, as well as the value of our investments in technology. Our performance in 2020 reinforces our belief that we are well positioned for continued success, as demonstrated by our operating revenue declining by only 1%, despite unprecedented challenges and uncertainty in 2020.

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

 

Page 30


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

 

Selected 2020 Compensation Highlights

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.

 

Page 31


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

Key Enhancements and Refinements to Our Compensation Program

We discussed our compensation programs with many of our shareholders and other parties since the distribution of our 2020 Proxy Statement in order to better understand their views regarding our compensation programs. We continue to discuss these programs with shareholders and other parties to keep us informed of current and evolving viewpoints.

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.

 

 

 

Page 32


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

 

Our Compensation Philosophy and Objectives

Our people are our most important asset. We operate in a human capital intensive industry and it is imperative to continue to retain, attract and motivate executives and professionals of the highest quality and effectiveness, taking into account the cyclical nature of our businesses.

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.

We Pay for Performance. We firmly believe that pay should be tied to performance. Superior performance enhances shareholder value and is a fundamental objective of our compensation programs.

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.

 

 

Page 33


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

 

Executive Compensation Practices:

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.

 

 

Page 34


Item 2: An Advisory Vote Regarding Executive Compensation | Compensation Discussion and Analysis

 

 

 

Compensation Program Design

The key elements of our compensation program consist of base salaries, annual performance-based incentive compensation and long-term incentive compensation.  We also have retention agreements with our NEOs that include severance protections.  The following is a description of our compensation elements and the purposes each is designed to support:

Overview of Our 2020 NEO Compensation Program

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 60th 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.

 

Page 35


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

Compensation Program Design—Base Salary

Base Salary. Base salaries are intended to reflect the experience, skill and knowledge of our NEOs, managing directors and other senior professionals in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual.

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.

Compensation Program Design—Performance-Based Compensation

Cash Incentives. Except for base salaries, all cash compensation opportunity is based on a combination of 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 the CEO, his performance in reference to goals and objectives set during the year. Accordingly, the cash compensation paid to our NEOs and employees as a group has fluctuated from year to year, reflecting changes in the Company’s performance and financial results, as well as individual performance, consistent with market practice in our industry.  Cash incentives are tailored to appropriately incentivize our NEOs and to account for the highly competitive market for executive talent.

Profits Interest Participation Rights Program. In early 2019, the Compensation Committee and the Company approved the establishment of a new long-term incentive compensation program consisting of profits interest participation rights which are equity incentive awards that, subject to certain conditions, may be exchanged for shares of our Class A common stock pursuant to the 2018 Plan. Profits interest participation rights are a class of membership interests in Lazard Group that allow the recipient to realize value only to the extent that both (i) the service-based vesting conditions and, in the case of PRPUs, the performance conditions, are satisfied, and (ii) the Minimum Value Condition, which requires an amount of economic appreciation in the assets of Lazard Group occurs as necessary to satisfy certain partnership tax rules before the fifth anniversary of the grant date, otherwise the rights will be forfeited. Upon satisfaction of such conditions, profits interest participation rights that are in parity with the value of our Class A common stock will be exchanged on a one-for-one basis for shares of our Class A common stock. The Minimum Value Condition has been satisfied with respect to PRPUs granted in 2019 with respect to 2018 compensation and PRPUs granted in 2020 with respect to 2019 compensation.

PRPU Awards—General Terms.

In February 2019, 2020 and 2021, our NEOs who served as executive officers of the Company throughout the relevant fiscal year received long-term incentive compensation awards in respect of 2018, 2019 and 2020 performance, respectively, in the form of performance-based restricted participation units, or PRPUs, pursuant to the program, rather than PRSUs. Like PRSUs, PRPUs are equity-based deferred incentive compensation awards in the Company that are subject to performance-based, service-based and other vesting conditions.

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

 

Page 36


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

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

 

Page 37


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

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.

Performance-Based Equity Award Metrics and Scoring: Encouraging Investment for the Future Growth of Our Business.

Based in part on the feedback we received as a result of our shareholder outreach, for 2020 compensation, the Compensation Committee conducted a thorough review of our PRPU metrics and determined that two newly enhanced financial ratios with a modifier based on total shareholder return, or relative TSR, are the most appropriate and, taken together, comprehensive performance metrics for purposes of PRPU awards granted in 2021 in respect of 2020 compensation: our Post-Investment Capital Return Ratio, or PI-CRR, and our Post-Investment Operating Margin Metric, or PI-OMM, each of which is described in further detail below. PI-CRR and PI-OMM reflect refinements to the Capital Return Ratio, or CRR, and Operating Margin Metric, or OMM, metrics that we have used historically to reflect our focus on investing for the future growth of our business.  Collectively, the PI-CRR and PI-OMM metrics, as modified by TSR, align directly with our long-term strategy of driving shareholder returns through high-quality revenue and earnings growth, focusing on managing operating margin for profitable growth, and returning capital to our shareholders, in each case, after investing for the future growth of our business. In addition, in response to shareholder feedback, the Compensation Committee eliminated a feature of our PRPUs whereby 25% of the total target number of shares of Class A common stock subject to the applicable award would no longer be at risk based on achievement of the performance criteria if the Company achieved an aggregate score of at least 1.0 with respect to a fiscal year during the performance period.  

Awards granted in 2020 and 2019 in respect of 2018 and 2019 compensation, respectively, continue to be subject to the previous CRR and OMM metrics, as well as a third ratio known as the Volatility Adjusted Revenue Growth Ratio, or VARGR.  We removed VARGR as a metric beginning with awards granted in 2021 in respect of 2020 compensation in order 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

 

Page 38


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

for the purposes of calculating the VARGR result.  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.

These performance metrics also reflect, among other things, the manner in which the Compensation Committee measures the success that the relevant NEOs can achieve in executing our long-term strategy and managing our business for the benefit of our shareholders.

An explanation of each metric applicable to PRPU awards granted in 2021 in respect of 2020 compensation is set forth below.

Post-Investment Capital Return Ratio – Returning Capital to Shareholders

We endeavor to return capital to our shareholders, including by paying dividends to our shareholders and repurchasing equity, after investing for the future growth of our business. We believe that our shareholders value our success in returning capital to them, and that the PI-CRR performance metric aligns directly with our objective of returning capital, but not at the expense of investment. We have a disciplined use of cash and if management does not identify sufficiently attractive opportunities to reinvest in our business through acquisition, hiring or investments, we generally expect to return cash to shareholders through dividends or share repurchases.  An explanation of the PI-CRR metric is set forth below.

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.

 

Page 39


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

We then determine our PI-CRR score based on the table set forth below.

 

 

 

 

 

 

 

 

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

 

 

 

If our PI-CRR is between levels set forth in the table above, we will use linear interpolation to determine our PI-CRR score based on the scores provided for the closest levels.

Post-Investment Operating Margin Metric – Managing our Operating Costs

We aim to effectively manage our operating costs, which we broadly consider in the form of compensation and non-compensation costs, and we regularly communicate our goals with respect to our management of these costs to our shareholders. By managing these costs over time, we seek to advance our ultimate objective of delivering a stable and successful operating margin. We also seek to retain the ability and appropriate incentives necessary to invest in our business over time for future profitable growth and not to discourage our NEOs from doing so. Pursuant to the PI-OMM metric, our NEOs are incentivized to pursue these goals, including investments for profitable growth, and help us achieve our PI-OMM objective over time.  An explanation of the PI-OMM metric is set forth below.

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.

 

Page 40


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

We then determine our PI-OMM score based on the table set forth below.

 

 

 

 

 

 

 

 

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

 

 

 

If our PI-OMM is between levels set forth in the table above, we will use linear interpolation to determine our PI-OMM score based on the scores provided for the closest levels.

Relative Total Shareholder Return – Addition of a Modifier to Further Align our NEOs with Shareholders

In 2021, we implemented a new modifier to the scoring of the PRPUs that we granted in February 2021, based on our TSR relative to the S&P 1500 in order to establish a further link between the creation of value for our shareholders and the level of payout pursuant to our PRPUs. Relative TSR is calculated by comparing the change in the price of our Class A common stock (including reinvestment of dividends) over the performance period against the same metric for the S&P 1500. The share price at the grant date is used as the starting point for the calculation, and a trailing average share price is used to calculate share price at the end of the performance period. The award modifier will be based on our relative TSR for the entire three-year period.  

The number of PRPUs earned over the three-year performance cycle will decrease or increase by up to 20% based on our TSR relative to the S&P 1500 as set forth in the table below.

 

 

 

 

 

 

 

Company’s TSR Relative to the S&P 1500

 

Award Modifier

 

 

 

 

 

 

 

<20th Percentile

 

 

 

0.8x

 

 

=20th Percentile 60th Percentile

 

 

 

1.0x

 

 

>80th Percentile

 

 

 

1.2x

 

 

If our relative TSR is between the 60th percentile and the 80th percentile, we will use linear interpolation to determine our award modifier based on the scores provided for the closest levels.

Scoring of Our Performance-Based Equity Awards

Generally, in respect of our PRPU grants made in February 2021, each of the two performance metrics (PI-CRR and PI-OMM) is weighted equally to determine an initial score. The score in respect of PI-CRR and PI-OMM for the three-year performance period will be based on the Company’s cumulative performance over the three-year period. The scoring corresponds directly to the level of achievement of the PI-CRR and PI-OMM metrics (taking into account any applicable interpolation), provided that an overall score above 2.0 would automatically be reduced to 2.0.

The score resulting from achievement of the PI-CRR and PI-OMM metrics would then be modified by multiplying the score by the relative TSR modifier.  For example, the achievement of a score of 1.5 for the PI-CRR and PI-OMM metrics for the cumulative three-year performance period and a relative TSR modifier of 1.2 would translate into payout of the award at 1.8 times the target level (subject to achievement of the service-based vesting condition and the Minimum Value Condition). Similarly, the achievement of a score of 0.5 for the cumulative three-year performance period and a relative TSR

 

Page 41


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

modifier of 0.8 would translate into payout of the award at 0.4 times the target level (subject to achievement of the service-based vesting condition and the Minimum Value Condition).

Evaluation of Performance Results for Outstanding PRUs

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

 

Page 42


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

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.

Other Long-Term Incentive Compensation

While PRPUs (and, historically, PRSUs) are the primary form of long-term incentive compensation for our NEOs who served as such throughout the fiscal year, in the case of our other senior Managing Directors, a substantial portion of each individual’s long-term incentive compensation is generally granted in the form of RSUs or profits interest participation rights and the remaining portion generally may be granted in restricted stock, LFIs or a combination of both at the individual’s election, and generally includes vesting terms that are different from those applicable to our NEOs. For example, such awards generally vest one-third on or around the second anniversary of grant and two-thirds on or around the third anniversary of grant, or, in the case of profits interest participation rights, entirely on or around the third anniversary of grant, and until 2019, such awards were subject to single-trigger vesting in the event of a change in control. Such awards granted in 2019 and later will generally be subject to double-trigger vesting in the event of a change in control. Prior to becoming our Chief Financial Officer, Mr. Russo served as Managing Director and Co-Head of the Company’s Capital Markets and Capital Structure Advisory practice. In connection with his service in a non-NEO role prior to 2018, Mr. Russo participated in our long-term incentive compensation program that was applicable to our other senior professionals. Pursuant to his grants in February 2017 (made in respect of his performance during 2016) and February 2018 (made in respect of his performance during the portion of 2017 in which he did not serve as our Chief Financial Officer), Mr. Russo received RSUs and LFIs. In addition, in connection with his service as a non-NEO prior to 2021, Mr. Orszag participated in our long-term incentive compensation program that was applicable to our other senior professionals.  Pursuant to his grants in February 2021 (made in respect of his performance during 2020, in which he became an executive officer toward the end of the year), Mr. Orszag received profits interest participation rights.

2020 Compensation for Each of Our NEOs—Compensation Process

Decisions with regard to incentive compensation are generally made in the first quarter of each year and are based on Company and individual performance in the prior fiscal year.

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.

 

Page 43


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

Structure of 2020 NEO Compensation Decision-Making Process

 

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

 

Rate Overall Business Performance

 

 

 

 

Below Par

Par

Above Par

 

Consider Reference Pay Ranges for Each Position

 

•   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

 

•   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

Our Compensation Committee Considers a Variety of Available Information. Before any year-end compensation decisions are made, the Compensation Committee reviews information from a variety of available sources.

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

 

Page 44


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

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.

We chose this comparator group, which was unchanged from 2019, because we compete in the same marketplace with these companies, among other, larger financial services firms, for highly qualified and talented financial service professionals. CAP noted that due to Lazard’s unique structure and business mix, there are a limited number of standalone public company comparators that provide an ideal comparison for these purposes. Though none of these firms serve as comparators for both of Lazard’s businesses, CAP believes this comparator group is appropriate in terms of size and represents a reasonable mix of firms in each of Lazard’s businesses.  Additional details regarding the composition of our peer group recommended by CAP, based on Global Classification Standard (GICS) Sub-Industry classification, revenue and market capitalization, is set forth in the following tables:

 

 

Page 45


Item 2: An Advisory Vote Regarding Executive Compensation | Other Compensation Matters

 

 

 

(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.

Due to the limited universe of standalone public company comparators, for 2020, the analysis that CAP prepared for the Compensation Committee also considered survey data that includes compensation information for private companies, subsidiary businesses of larger financial services firms, and cross-industry organizations that are similar to Lazard in terms of complexity to get a more complete picture of the competitive market for Lazard’s NEOs. The Compensation Committee also reviewed data with respect to certain other companies with which we compete for financial service professionals, but that substantially exceed our market capitalization; however, this review was for informational purposes only and these companies served only as reference points to provide a broader perspective on competitive pay levels and practices.

CAP’s analysis compared the total direct compensation for our NEOs (calculated with respect to 2019 base salary and annual cash incentives, deferred cash awards and PRPUs (valued at the target payout level and awarded in February 2020 in respect of 2019 compensation)) to the total direct compensation for the appropriate named executive officers in the comparator group described above, or an appropriate subset of that comparator group, calculated based on compensation levels for 2019 (as reported in 2020). Peer data for 2020 was not fully available at the time of CAP’s analysis, but the pay ranges do consider expectations for market compensation levels in 2020. CAP constructed a compensation reference range for each of our NEOs based on the comparator data as follows: for Mr. Jacobs, $9.5 million to $14.0 million; for Mr. Russo, $3.75 million to $5.75 million; for Mr. Bhutani, $7.5 million to $11.0 million; for Mr. Orszag, $5.5 million to $8.5 million; and for Mr. Stern, $5.0 million to $7.5 million. See “Awarded Compensation Table” below for a table describing the compensation paid to each of our NEOs for 2020, presented in the manner that it was considered by the Compensation Committee (which was similar to the methodology used by CAP in calculating total direct compensation paid by the firms in the comparator group).