Top Firm Awards Mid-Year Bonus Advances In Move To Retain Key Staff
Lehman has increased the percentage of senior employee bonuses that will be paid in restricted stock to 65% (up from a the previous high of 50%), but has granted equity awards on July 1st of 20% of last year's bonus payments as an advance on this year's payout. Although this year's stock award has not been issued at a discount, Lehman staff and executives are clearly anticipating / hoping that the current stock price is at or near its low this cycle. It will, however, vest evenly over each of the next 3 years, instead of the usual 5-year vesting period.
Bloomberg quotes CreditSights analyst David Hendler, who said: 'They (Lehman) can generate internal capital and keep nervous employees focused on their work'. The firm's shares closed up 6.7% Wednesday, after taking a beating Monday when they closed at an 8-year low following a raft of unlikely takeover rumours. The new equity plan will not further dilute shareholder equity, as the initiative has already been accounted for.
CNBC reports that the move may have been prompted by concerns expressed by Marvin Schwartz, the top man at Lehman's money management unit Neuberger Berman (and one of Lehman's largest shareholders), who is understood to have told firm CEO Dick Fuld that something must be done to reassure Lehman staff and investors about the future direction of the firm. Schwartz, who is said to regard the issue of new equity awards to Lehman staff as a big signal to the market that the firm is not for sale, is also thought to be pushing for a spin-off of Neuberger Berman, which is currently one of the most profitable parts of the Lehman empire.
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