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RBS Asks Court to Block $1 Million Bonus to Ex-Risk Chief

RBS Asks Court to Block $1 Million Bonus to Former Risk Chief
The Royal Bank of Scotland Group Plc (RBS) logo is seen outside the company's headquarters in London, U.K. Photographer: Simon Dawson/Bloomberg

Royal Bank of Scotland Group Plc asked a London court to approve a decision to block a 700,000-pound ($1 million) bonus awarded to its former head of corporate risk solutions before his dismissal.

Gary Cottle, who headed risk solutions in the investment banking division, lost his job when the unit was restructured in 2011 and refused to accept an alternative post, RBS said in court documents.

“If I had been offered a suitable role I would still be there,” Cottle said by phone.

The bank said it is entitled to withhold the final payment of a 1.9 million-pound deferred bonus granted in 2009 because Cottle acted “unreasonably” in turning down the role, according to the May filing.

Legal disputes in London over bonus payments have shed light on the culture of compensation in financial services, which some say contributed to the near collapse of the banking industry. More than 100 bankers won a court ruling in May against Commerzbank AG to force payment of individual bonuses worth as much as $2.6 million.

European regulators toughened bonus rules in 2011 to discourage the type of risk-taking that led to the 2008 financial crisis. The guidelines limit cash payouts to about one-quarter of the total to ensure incentives are linked to long-term performance, with the rest paid in deferred securities.

Employment Tribunal

Cottle, who joined RBS from Morgan Stanley in 2007, has filed a claim against the bank at the central London employment tribunal for failure to make a severance payment and unfair dismissal, according to tribunal filings.

RBS, which is majority-owned by the British government, wants a court declaration that it was entitled not to pay Cottle the remaining 700,000 pounds and that Cottle acted unreasonably. Sarah Small, a spokeswoman for the Edinburgh-based lender, declined to comment in an e-mail.

The dismissal was surprising “given my team’s strong performance and contribution over the previous four years,” Cottle said.

His 2009 bonus of 1.9 million pounds was deferred over two years and paid in RBS bonds, the bank said in court documents. The bonds vest, or mature, at the discretion of the remuneration committee if an employee has left the lender.

The lawsuit shows “how insecure an employee’s ability to secure a bonus becomes, even where performance targets have been achieved,” said employment lawyer Samantha Mangwana of RJW-Slater & Gordon, “once this is subject to the discretion of remuneration committees and the employee is no longer flavor of the month.”

Mangwana isn’t involved in the Cottle case.

The case is The Royal Bank of Scotland Group Plc v. Mr. Gary Cottle, High Court of Justice, Queen’s Bench Division, HQ12X01948.

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