Bruce Wasserstein is Overpaid

Now that’s what I call a bonus. Lazard reported 2007 profits of $122.6 million today, and gave CEO Bruce Wasserstein a bonus of $36.2 million for the year – on top of a restricted-stock grant of $96.3 million. How did Lazard’s share price perform over the course of 2007? Well, it started the year at $47.33, and ended the year at $40.68 – a fall of 14%. It’s now lower still, at $37.39.

There are two things to note about Wasserstein’s pay. The first is that it’s an absolutely enormous proportion of his bank’s total profits. And the second is that those profits don’t have much to do with Wasserstein anyway. Here’s Karl Taro Greenfeld in February’s Portfolio:

Associates say Wasserstein’s role is far less hands-on and that more of the operational details are left to Lazard veteran Steven Golub and North America head Ken Jacobs. "Steven Golub is really running the firm," says another longtime Lazard banker…

In an industry in which a banker’s bonus is usually tied to how much he generates in fees, Wasserstein’s description of his role sometimes sounds a bit woolly, with vague talk that’s hard to quantify…

Rival bankers like to point out that Wasserstein may not be a welcome presence in many C.E.O. suites these days. "He’s a relic," says one competitor. "He’s not an industry expert, so why would a C.E.O. listen to him?" (Investment banking, increasingly, is dominated by experts who have an extensive web of connections and expertise in one particular area, say utilities or technology. Wasserstein’s strength is as a generalist, with contacts across a vast network of industries.) A former senior Lazard banker still close to the firm says a few members of the executive committee that reports to Wasserstein are already grumbling that he is not exactly a dealmaker anymore, nor is he an especially active manager.

Wasserstein’s got a great gig. He sits atop Lazard, trousering enormous bonuses for doing nothing in particular: not running the firm, not improving the share price, not putting deals together. Lazard’s shareholders can’t do much about it, either: Wasserstein controls the board, and in any case the last thing Lazard needs right now is another period of internecine turmoil. But it still leaves a nasty taste in the mouth.

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