Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Commerzbank Defends Bonus Cut After Bank Fell Off ‘Cliff’

Commerzbank Defends Bonus Cut After Bank Fell Off ‘Cliff’
The Commerzbank AG headquarters are seen in Frankfurt. Photographer: Hannelore Foerster/Bloomberg

Feb. 20 (Bloomberg) -- Commerzbank AG didn’t act dishonestly in going back on a promise to pay bankers from a guaranteed bonus pool, the German lender’s attorney said in a London trial over payments to Dresdner Kleinwort staff.

Commerzbank, which took over Dresdner in 2009 and cut bonuses by 90 percent or more, is defending a lawsuit brought by 104 Dresdner bankers who want individual payouts of as much as 2 million euros ($2.7 million).

Stefan Jentzsch, Dresdner’s former CEO, had promised at a 2008 company meeting to set aside 400 million euros for discretionary pay. Dresdner’s record loss that year justified changing the policy and Jentzsch’s pledge wasn’t legally binding, Commerzbank lawyer Thomas Linden said.

“It may be perfectly honorable to withdraw from a non-binding commitment in circumstances when the business has fallen off a cliff,” Linden told the judge in closing arguments today. “Every banker, we say, in the U.K. knows that until you have a document which sets out the award, you don’t have an entitlement.”

European banks face pressure from governments and regulators over pay. Executives at Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc should have to give up bonuses so individuals are not rewarded for failure, the U.K. Treasury said today, while European financial services chief Michel Barnier has called for new curbs on excessive compensation.

Unpopular Bonuses

The case “comes at a time when the words ’banker’s bonus’ are perhaps not the most popular in the English language,” Andrew Hochhauser, a lawyer representing some of the Dresdner claimants, said in his closing arguments.

Nonetheless, the 2008 bonus pool promise had been agreed with then-owners Allianz SE in consultation with the U.K. Financial Services Authority as a way to stop staff leaving Dresdner, he said.

“It’s not just a mere declaration; it’s not just a unilateral management policy,” Hochhauser said. “It’s giving something, something of value, added to what they already have.”

Commerzbank Chief Executive Officer Martin Blessing told the court last month that while he had disappointed staff by reducing bonuses, the bank, which took an 18.2 billion-euro bailout from the German government during the credit crunch, had to consider the interests of other employees, shareholders and the general public.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.