Here’s a story to send Middle England apoplectic: a group of 72 former traders at Dresdner Kleinwort are suing the bank’s new owner Commerzbank, in a bid to get their hands on bonus payments of up to £1.5m. They claim the money had been promised to them before the takeover – but at a time when the excesses of City traders are being widely blamed for all our economic woes, they’re unlikely to receive much sympathy in the court of public opinion. On the other hand, if they were contractually entitled to these payments, a court of law might take a different view…
The 72 traders all worked in Dresdner’s fixed income and commodities division, which remained consistently profitable. Unfortunately, lots of other bits of the bank weren’t, so in September it was flogged to Commerzbank in a €5bn fire-sale. The German bank, which is a quarter-owned by its national government (and thus susceptible to all the political pressures currently facing RBS et al in the UK), promptly cut their bonus pool by 90%, citing a ‘material adverse claim’ clause. But the traders insist that their bonuses had been ring-fenced, so they should be entitled to payouts totalling about €34m – including eight individual payouts of over €1m.
Bankers – and traders in particular – are the source of all evil at the moment as far as the general public is concerned, so they’re unlikely to get much good press. Who’s going to care if a rich trader doesn’t get a £1.5m bonus, at a time when the entire economy’s gone to the dogs due – and after a year in which their own firm reported a loss of nearly €7bn? It's not like they're all on the breadline now - most have bounced into similarly lucrative jobs elsewhere. Not unreasonably, people are up in arms about how much bankers were paid, particularly since some of these bonuses apparently came with no performance conditions attached (which seems a contradiction in terms).
Then again, that’s not the fault of these particular bankers. If they actually made money for the bank, and thus earned a bonus under the terms of their employment, they’re entitled to their wedge – however much it may stick in the craw. If an employer has made its bonuses too big, or too easy, or too difficult to claw back, then that’s their own daft fault – they can’t just change the rules in retrospect.
Of course, this will be the legal point at issue: Commerzbank argues that the contract was sufficiently hedged with ifs, buts and maybes to justify the reduction. But this argument has already failed once this year – the bank was ordered by the courts to pay out £10m to four of its senior bankers following a similar claim. It’ll be hoping for better luck this time round...
In today's bulletin:
Pick-up in job market adds to recovery hopes
McLaren gambles by branching out into road cars
Dresdner traders demand £30m in bonuses
Editor's blog: Putting the squeeze on the booze industry
Late payers get creative with the truth