A Report from the Lazard Shareholder Meeting in Bermuda

The Wall Street investment bank Lazard held its annual shareholder meeting this week at Bermuda’s luxurious Elbow Beach Hotel. Bermuda is known for its beautiful sandy beaches and, less flatteringly, as an offshore tax haven. Headquartered in New York City, Lazard is incorporated in Bermuda.

Like a tax shelter that lacks economic substance, Lazard’s shareholder meeting seemed empty of meaningful content. There was no discussion of the company’s performance as is customary at other shareholder meetings. I felt like the only attendee who was not affiliated with the company.

Lazard’s corporate secretary ran through the entire meeting agenda in less than five minutes. Lazard’s board of directors and a number of other executives attended the meeting but did not speak. My job was to present an AFL-CIO-sponsored shareholder proposal as is required by the U.S. Securities and Exchange Commission’s regulations.

The AFL-CIO’s shareholder proposal asked Lazard to ban the payment of unvested equity to senior executives if they enter into government service. Known as “government service golden parachutes,” this unvested equity would normally be forfeited after an executive’s voluntary resignation.

Paying executives to enter government service fosters a “revolving door” between Wall Street and financial regulators. While government service is commendable, financial regulators should be free from any perceived bias due to extra compensation received from their previous employers.

I also delivered a petition signed by more than 44,000 individuals calling on Lazard to stop this questionable pay practice. The petition was organized by the AFL-CIO, Public Citizen and Americans for Financial Reform to Lazard, Morgan Stanley, JPMorgan, Citigroup and Goldman Sachs. The AFL-CIO has shareholder proposals to ban government service golden parachutes pending at these other firms.

The board of director’s opposition statement to the AFL-CIO’s shareholder proposal stated that “Lazard fosters a strong culture of public service.” But when it comes to paying income taxes in the United States, however, the company seems to be less civic minded. Lazard incorporated itself in Bermuda in 2004.

The AFL-CIO’s shareholder proposal was supported by more than 40% of Lazard’s shareholders who voted on the proposal. It remains to be seen whether Lazard’s board of directors will respond to this strong level of shareholder support.