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Thursday, 29 October 2009

Laying up treasures in heaven

The Wall Street Journal reported yesterday that Lazard will make a one time charge of $86.5 million in the fourth quarter related to expenses of paying restricted stock unit awards to the late CEO Bruce Wasserstein.

At which point the WSJ article breaks off into how that figure compares with Lazard's quarterly revenues from deal doing etc, which kind of misses the point. Wasserstein was top dog at Lazard and it is not surprising that he should have a big finger in the pie with lots of deferred stock - well not that much compared to his total wealth, but big numbers in absolute terms.

But what kind of crummy accounting is that? Lazard takes a massive one time charge because of accrued stock rights that crystallised when Wasserstein died. Was there a clause in his contract that said he got an extra $86.5 million of stock if he died? Of course there wasn't. That was restricted stock that Wasserstein had earned that was not booked as an expense because it hadn't vested.

So what exactly had to happen for the expense not to arise that meant Lazard didn't have to book it earlier? Is it really kept out of the P&L because the Lazard directors honestly though the CEO might quit and forfeit his $86.5 million? Dream on.

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