Dresdner Celebrates Bonus Win Commerzbank Wants to Forget
Matthew Jordan, like many Dresdner Kleinwort bankers, was worried about Commerzbank AG (CBK)’s plans to take over the investment bank in 2008. Jordan, Dresdner’s deputy head of equity research, had lost 20 analysts to rivals that year amid uncertainty about the lender’s future.
So he was relieved when Dresdner’s then-chief executive officer Stefan Jentzsch used a December town hall meeting to ease concerns about a bonus pot set aside that summer to retain staff. Commerzbank executives were “men of honor who will stick to the bonus commitments,” Jentzsch said, according to trial documents.
Less than three months later Commerzbank proposed cutting awards by as much as 90 percent because of worse-than-expected losses. “Everyone was outraged,” Jordan, 41, said in a phone interview. “From the moment I heard, I spent the next 24 hours rushing around London meeting different law firms.”
Commerzbank last week ended four years of fighting Jordan and more than 100 other Dresdner bankers. It decided not to appeal two London court rulings awarding the bankers about 50 million euros ($65.7 million).
While the Frankfurt-based lender maintains its conduct was proper, Commerzbank didn’t want to waste money continuing to fight the case, Margarita Thiel, a spokeswoman for the lender, said in an e-mail. The bank consistently argued that a 6.5 billion-euro loss at Dresdner during 2008 justified cutting compensation.
The decision to reduce bonuses “was simply responsible, reasonable and prudent in those circumstances and the right decision to take,” she said. Commerzbank has fought lawsuits in Germany, Italy and Japan over the Dresdner cuts.
The bankers’ victory may not end the legal dispute for Commerzbank in London. Lawyer Mark Levine is representing another 40 ex-Dresdner employees who heard Jentzsch’s promises and who never joined the U.K. lawsuit.
“Now the case has concluded successfully, this group can stake claims for their bonuses,” said Levine, who was the lawyer for some of the 104 employees in the original case. As long as they didn’t sign waivers giving up their right to compensation, Levine said they have a good chance of success.
Commerzbank would rather leave the issue in the past.
“This matter arose in 2008 within the Dresdner investment banking business and as such is seen as a legacy issue from long ago and at odds with Commerzbank’s investment-banking approach and culture,” Thiel said.
The case hinged on comments Jentzsch made in August 2008 to Dresdner staff pledging to set aside 400 million euros for compensation. The speech, which wasn’t recorded or transcribed, was broadcast on large screens in Dresdner offices including London.
At a London trial in February last year, Jentzsch testified that U.K. finance regulators had put Dresdner on a watch list of vulnerable firms. The bonus pot was for “safety and stability,” he told the court.
Jentzsch, 52, declined to comment through his assistant at Perella Weinberg Partners LP, where he is now a partner.
Commerzbank bought Dresdner from Allianz SE (ALV) in January 2009, the same year it took an 18.2 billion-euro bailout from Germany. After completing the takeover, Commerzbank said it would cut about 9,000 jobs and phase out the Dresdner brand by the end of 2010.
Commerzbank CEO Martin Blessing said at the London trial, where Jordan also testified, that he expected his employees to show loyalty, not make demands for money.
Stefan Martin, a lawyer who advises banks on employment issues and wasn’t involved in the case, said his clients weren’t surprised at Commerzbank’s defeat. For all the emotional issues involved, the case boiled down to a simple contract dispute.
“It has always been the case that oral statements could create binding commitments and this case merely illustrates that in fairly dramatic terms,” he said.
The combination of Jentzsch’s town hall speech and letters to employees meant it “became impossible for the bank to change its mind and renege on the assurances,” Martin said in an e-mail.
Jordan, who left his job at Societe Generale SA (GLE) in February, says the lawsuit hasn’t put him off working in financial services. “Most of us don’t feel any anger or bitterness. We are just pleased it’s over,” he said.
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