Commerzbank Defends Reneging on Bonus After German Lender Fell Off ‘Cliff’
Commerzbank AG (CBK) 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 (LLOY) 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.
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 (ALV) 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.
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