NEW YORK - The new management team heading WR Lazard & Co. faces some difficult times as a result of the death of the firm's founder and managing principal, according to observers.
While management is working to shore up the firm and protect its position as one of Wall Street's chief minority-owned investment firms, observers predict the team will have to struggle to reassure clients and to continue the expansion of its investment management business begun a year ago.
Not only is the firm faced with dispelling the aura of disarray that normally surrounds the sudden death of a principal, but also some observers say the circumstances surrounding the death earlier this month of Wardell Lazard could hamper new business efforts.
WR Lazard management acted quickly to replace Mr. Lazard by appointing Melvin L. Eubanks as the firm's chairman and co-chief executive officer. Mr. Eubanks had been vice chairman of WR Lazard, Laidlaw & Mead Inc., the broker-dealer subsidiary of WR Lazard & Co. Management also appointed a new board including Mr. Lazard's widow, Betty Lazard, who had been one of the firm's founders and its treasurer from 1985 to 1990, as vice chairman. Kenneth Glover, who headed WR Lazard's client services efforts, was appointed vice chairman and co-CEO.
Mr. Eubanks, who had been serving as acting chairman since the morning after Mr. Lazard's death, said a plan of succession had been in place since September. Mr. Lazard's absence will be felt, he said, but the firm will go on with the management structure that was provided for in that plan. Alan Bond, president and chief investment officer of Bond, Procope Capital Management, New York, and a former Lazard executive, noted that while Mr. Lazard's absence will leave a big void, he did delegate to his staff.
But, industry observers say WR Lazard will face struggles in the short term to fight off doubts among sponsors and consultants.
The relationship between institutional clients and managers is very tight, said Brad Hearsh, managing director of the investment banking division of PaineWebber Inc., New York. He said when pension consultants are surveying the field of managers in a search, they look for reasons to disqualify candidates and pare lists. That can bode ill for a firm that has an event such as the death of key staff, he added.
The circumstances surrounding Mr. Lazard's death also are bound to play a part in client relationships. Mr. Lazard was found dead in his hotel room in Pittsburgh May 11 of what the medical examiner concluded was an accidental overdose of cocaine.
There is "no question" those circumstances will be a factor among consultants and clients, said Chas Burkhart, president of Investment Counseling Inc., investment management business consultants in West Conshohocken, Pa.
Mr. Eubanks conceded he has been asked the question often, but he does not think it will affect the company's relationships any more than if Mr. Lazard had died of natural causes.
He added the company had client meetings scheduled before Mr. Lazard's death, none of which has been canceled. Executives of the firm are meeting with existing clients to present the transition plan and answer their questions.
At the time of Mr. Lazard's death, WR Lazard had reached $2.75 billion in assets under management, including $2.55 billion in discretionary U.S. tax-exempt assets. Its asset management clients include the pension funds of the District of Columbia, Baltimore, New York and Los Angeles; the Police & Firemen's Disability Pension Fund of Ohio; the California State Teachers' Retirement System; Manhattan and Bronx Surface Transit Operating Authority; the AT&T Foundation; Texaco Corp.; Avon Corp.; and the endowments of Ohio State University and the City University of New York.
Clients are taking a wait-and-see approach.
"I had some preliminary discussions with them and, pending the progress of the firm and our evaluation of the circumstances, we will decide if we will go forward or not. I have no reason at this juncture to say we won't," said John Bell, assistant treasurer of Consolidated Edison Co., New York Inc. WR Lazard manages a bond portfolio for the $4 billion fund; Mr. Bell would not disclose its value.
Wayne I. Ross, pension finance and investment officer of the Chicago Transit Authority, another WR Lazard client, said the fund's board probably will discuss the situation with its consultant, The Wellesley Group, Waltham, Mass.
The obstacles are not insurmountable, say industry observers. A lot will depend on reassuring existing clients, solving issues of ownership of the firm and the management's performance from now on, they say.