Michel David-Weill once told a friend that he had made a study of when families run places too long. He had concluded that “if he stayed on too long it would destroy the firm and if he got out too soon it would destroy him”. Recent events and criticism in France and the US may have moved up a tooth that ratchet of destruction and self-preservation, but there is no sign that David-Weill is ready to leave his patrimony to others. His father and his grandfather ran the business before him, and he will leave only with the greatest reluctance. Two factors, though, are making his position precarious. The first is the personal strain of running a bank that has experienced many internal pressures on individual relationships. The second is fending off external pressures from large institutions, which are chipping away at its market, and would swallow it up the moment it showed the slightest inclination.
The recent disclosure that Lazard insider Antoine Bernheim supported and advised a raid by French entrepreneur Vincent Bolloré on shares in companies that form part of the complicated Lazard ownership chain was the most tangible evidence so far that David-Weill’s network of family friends and colleagues was irrevocably imperilled.
This raid, which David-Weill described to Euromoney as “French diversions”, was repelled after David-Weill provided a very generous exit to Bolloré, who doubled his money. But it left David-Weill with the very clear knowledge that Bernheim was now a Trojan Horse inside his French office. Bernheim still occupies at desk at the Lazard office on Boulevard Haussmann in Paris.
Bernheim, a descendant of one of the bank’s four original French proprietors and a substantial shareholder, fell out with David-Weill when the bank refused to support him in a complex dispute over board positions involving Mediobanca, the Italian bank with which Lazard has had a long relationship, and Generali where Bernheim has been a long-time director.
But Bernheim, now in his sixties, is not merely part of the controlling family interests. He has also been a key player in the Paris bank. His contacts at the highest level of French companies have ensured the bank its French pre-eminence. One colleague referred to Bernheim as “the Felix [Rohatyn] of France”. The loss of Bernheim from the close circle of David-Weill advisers and friends is both a personal and professional body blow that will hurt David-Weill.
There have been other departures from David-Weill’s circle of personal associates that will also hurt him and accentuate the feeling of isolation. Felix Rohatyn was a long-standing friend and colleague who left the bank to become US ambassador to France after a row with David-Weill. Rohatyn, who worked for the firm for some 40 years, bridled at the low percentage of the profits David-Weill accorded him. It is understood that he received no more than 5% each year, whereas the chairman received 15%, even though Rohatyn was by far the largest rainmaker and high-profile star.
Rohatyn, who engineered the financial rescue of the bankrupt city of New York in the 1970s, had become an investment banking legend. His personal client base included such top-line companies as United Technologies, ITT, Warner Communications and RCA. Rohatyn’s relationship with Howard Geneen, the ITT chairman, was long established and particularly fruitful for the firm. Rohatyn oversaw the firm’s investment banking business, and was a mentor for a generation of dynamic young dealmakers such as Steve Rattner who sought to continue the Lazard tradition of aiming to box above its weight, winning mandates for the largest deals through wit and flexibility rather than any financial muscle.
The loss of men of his own generation has contributed to what one colleague called the 68-year-old David-Weill’s growing disillusion. He has “become cynical”, says one. “Every day he is confirmed in his view that you can manipulate everyone with money. If you have done what he has done for so long, it is hard not to feel personally indifferent to people. He has become too autocratic.” Another says: “There is a risk to Lazard that Michel is getting older and is becoming less ‘inspirational’. He doesn’t have the energy, the sort of human dynamism which he had when he was younger. Evelyn de Rothschild too is a very remote figure. But Rothschild has other Rothschilds around the place. There is no other Lazard in the family.”
The sense of isolation felt by this last of the David-Weills (a family that married into the original French Lazards) contributes a general perception that David-Weill has become “detached from humanity”, in the words of one former British colleague. It has been suggested that he is also unbearably arrogant, but friends reject that out of hand. “He is not arrogant at all. He may be detached. Everyone will tell you he is the most courteous man. He can be detached sometimes because he is a really cool-headed and pragmatic man that he rarely gets emotionally involved in situations. That’s part of his extraordinary vision. People confuse arrogance and indifference.”
The observation is confirmed by one US banker: “Michel is unfailingly polite and pleasant. I never heard him raise his voice or say a harsh word. It’s much more that he ignores people. When he came to New York, he’d spend most of his time meeting with partners and so on. But you’d have a conversation with him about a serious subject and make some suggestion to him about how things might change and it would never happen. So, he wouldn’t ignore you face to face, simply ignore any outcome or action that might help things get better.”
Now the tables have turned on the banker who was once feted as a Wall Street star whose brightness compared only with that of his distinguished predecessor at Lazard, André Meyer. David-Weill replaced Meyer in 1977, when Meyer, who had run the firm for some 40 years, was too ill to continue.
Colleagues see his personal and professional style as at best quaint and at worst archaic. A long-standing partner at the French firm, Jean Claude Haas, likened the role of employees at the firm to that of feudal farmers. “Objectively, Michel is the landowner and everyone else is a tenant farmer. They get rich, but they’re still tenant farmers.” Haas later told Euromoney that the statement was “unfortunate”.
Another former colleague says: “If you are working in a family firm, you want to get on with the family. People feel let down, betrayed.” He also complains that David-Weill has made no effort to adjust his style to the modern need for accountability and openness. This was well demonstrated when the chairman referred to the American investment bankers who have made the firm rich as “mercenaries”.
These men, who have largely left the firm, talk of David-Weill as manipulative and divisive. “He once famously said that he managed people not by finding their strengths, but by using their weaknesses,” says one former colleague. “To control the place he always operated on the basis of divide and rule. He encouraged people to spill the dirt on each other, keeping people insecure.” It can come as no surprise that many leave the firm bitter, if rich. “He was once regarded as remarkable and a star,” says the same source, “but he neglected the human activities necessary to retain people’s loyalty. His feeling was: ‘I pay these people a lot of money and they should be happy.’ When the firm’s profits hit crisis-point there were resentments.”
Even Sir John Nott, who was defence minister under another assertive leader, UK prime minister Margaret Thatcher, and chairman of the London bank between 1983 and 1990, found David-Weill’s style oppressive. Nott says David-Weill is “a control freak. Control of the three houses means everything to him. Unless someone controls these difficult people, the thing will fall apart.” Although Nott speaks of David-Weill’s “excellent banking judgment”, he also admits to having “strong disagreements on profit sharing, on deals and on fee sharing about what was London’s share and what was New York’s. I felt that because he was the senior working partner in New York, he had to keep the American partners happy. Sometimes I felt this was at the expense of London.”
David-Weill eventually fell out with Nott, as he has with many of the top managers appointed around him, and brought in David Verey in London as Nott’s deputy. In due course, Verey, a blue-blooded banker whose father had headed Schroders, replaced Nott. One former colleague comments: “David-Weill is no respecter of people or status. Men with big egos like Nott were bound to collide with him.”
Whatever doubts former colleagues have about David-Weill’s style in dealing with people, all acknowledge that he has brought a European-style standard of decency and propriety to a firm that is unusual in the financial community. “He looks at the world quite differently from anyone else,” says a former colleague. “He has never toiled on the trading desk. He looks at long-term trends while everyone else is toiling away for the next six months.”
In his heyday, David-Weill was the multi-cultural global banker before his time, the chameleon that was at one time acceptable and appreciated in many countries. A former colleague says: “He was emotionally suited to flying into Paris on Concorde and being a Frenchman in a French firm. None of the the Americans could communicate with these guys let alone understand French culture, so Michel was a bridge. His personality could change in different places. So when you wanted to get something agreed, you would not go and see him in Paris where he had a more conservative, cautious view of the world but in New York and you waited until he was thoroughly Americanized.”
One former colleague says: “Michel liked to do business in America and socialize in France. Michel doesn’t socialize very much in the US. Compared with others, contrary to what people think, he doesn’t socialize that much. Socializing in the US means being on the charity donations circuit – he doesn’t do that, that bores him stiff. And the little socializing he does, he does in France.”
David-Weill’s cautious Europeanism and his personal and professional philosophy, which stresses individualism rather than corporatism and structures, underpins his complete hostility to a merger with a large American bank. He believes passionately that individuals make a difference. He says that the most dangerous thing for business is the advance of large global integrated banks that buy out smaller banks and try to make a business out of it.
This philosophy has served the bank well over the past 30 years, and David-Weill and his colleagues have prospered. But the squeeze on the advisory business by the bulge bracket is now stronger than ever. Pessimists warn that the market has changed for good and that Lazard should accept the fact and sell out. Optimists say that small firms such as Lazard will have to wait 10 years before the independent advisory business picks up again.
Nott says: “The Lazard-type advisory bank will climb back, but not for a decade. They are having a difficult time because of the boom in the big American banks. If they keep private, they will prosper.” David-Weill reiterated the point in a recent interview: “I do not seriously think that in 10 years this activity of giving banking advice will remain in the hands of seven world players – competition always returns. Clients need diversity.”
Belief in old-fashioned long-termism and high standards has long percolated David-Weill’s banking practices. So he is careful to be loyal to long-standing clients. When the firm was under pressure to ditch Banque Nationale de Paris, a long-term client, in its three-cornered fight with Société Générale and Paribas, David-Weill insisted it stay with BNP. Lazard had helped BNP in a number of unsuccessful struggles and many French partners feared this would be another one. But despite widespread pressure inside the firm, David-Weill prevailed and the decision was justified by the outcome of the takeover contest.
A former colleague who was at the Paris bank at the time of the BNP bid says: “If we started letting down our core clients because they’ve had a string of misfortunes, and we believed it would be more opportunist to be representing another company, that would destroy what we are. If Michel hadn’t been there that is what we might have done. He’s not someone on another planet, he makes judgements on deals.” Another former US colleague sees it differently: “Michel didn’t really get involved in day-to-day banking. He played senior partner at lunch now and then and he’s good, skilled at relationships but he never really got involved in deals.”
Although Michel David-Weill is undoubtedly actively involved in ensuring that Lazard both remains independent and within the David-Weill family, no observer either within or outside the firm would hazard a guess at his plans. Although he has appointed Bill Loomis as his deputy, few suggest that Loomis is David-Weill’s nominated successor.
David-Weill spoke in highly cryptic terms of Loomis’ prospects, saying: “it would not be abnormal for Loomis to become the successor when I disappear”. One observer describes this as “cutting off Loomis at the knees when he had only just started in the job”. The most likely succession to David-Weill is thought to be in the form of a management committee, out of which a leader would arrive in due course.
Ensuring the ownership of the firm remains in family hands after he “disappears” is likely to be equally complex. Observers say his private thoughts on this are likely to have been shared with “no more than a few Frenchmen”. But some talk about secret trusts in the Channel Islands or Bermuda. It appears the very personal style that inspired the bank during David-Weill’s lifetime will outlast his reign.
