Commerzbank Admits Defeat in $66 Million Dresdner Bonus Case
Commerzbank AG (CBK) said it won’t appeal a U.K. court ruling that paves the way for 104 bankers to recover 50 million euros ($66 million) in bonuses after four years of legal skirmishing.
Continuing the case “would unnecessarily expend resources that can be better employed on our current and future activities,” said Margarita Thiel, a spokeswoman for Commerzbank, which is 25 percent government-owned after receiving an 18.2 billion-euro bailout in 2009.
The German lender reduced bonuses by as much as 90 percent after taking over Dresdner in 2009. Two U.K. courts ruled the cuts were illegal because of a pledge by Dresdner’s then Chief Executive Officer, Stefan Jentzsch, to set aside 400 million euros for compensation.
While European banks are facing proposals for some of the world’s toughest pay curbs, Frankfurt-based Commerzbank has fought legal battles in Germany, Italy and Japan to defend the Dresdner bonus cuts. In the U.K. case, the Dresdner bankers were seeking individual payouts of as much as 2 million euros.
Commerzbank maintains it was reasonable to reduce awards because of a 6.5 billion-euro loss at the division. The decision not to appeal doesn’t affect its position in legal proceedings taking place in other countries, where courts have upheld Commerzbank’s position, Thiel said.
“Common law and common sense have prevailed,” said Clive Zietman, a lawyer for some of the bankers. The proceedings “are now closed.”
Commerzbank bought Dresdner from Allianz SE (ALV) in January 2009, the same year it took an 18.2 billion-euro bailout from Germany at the height of the financial crisis. At a 2012 London trial in the case of the 104 bankers, Chief Executive Officer Martin Blessing said he wanted employees to be motivated by loyalty not money.
Dresdner was under pressure from the U.K. finance regulator to prevent an exodus of staff during a 2008 restructuring. Jentzsch’s comments at a town hall meeting in Frankfurt were intended to stabilize the bank, according to a court of appeal ruling confirming they were legally binding.
Commerzbank shares are down 26 percent this year amid a fifth capital raising in four years. The bank is selling assets and cutting staff to return to profitability, while investors protested Blessing’s management at its annual general meeting last month.
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