European Banks Reduce Bonuses More Than U.S.
Large European banks are toeing a harder line on employee bonuses than their U.S.-based counterparts.
Deutsche Bank - among the better-performing global institutions, and one of a minority that hasn't accepted any state aid thus far - plans to cut the past year's bonuses by 60 percent on average at its securities unit, Bloomberg News reports, citing an unnamed source. That's a substantially larger average decline than the 36.7 percent estimate for Wall Street employees released last week by New York State comptroller Thomas DiNapoli.
Meanwhile, major Europe-based institutions that took government aid are cutting company-wide bonuses still more. UBS, which was forced to accept a $59.2 billion Swiss government bailout last October, slashed its 2008 bonus pool by more than 80 percent (excluding brokers), Bloomberg reported last week.
Dresdner Bonuses in Limbo
And Frankfurt-based Commerzbank is "looking at the agreements" by its newly-acquired Dresdner Kleinwort investment bank to pay its bankers about 400 million euros ($559 million at the year-end exchange rate) in bonuses for 2008, a Commerzbank spokeswoman told Bloomberg News.
Dresdner's former parent, Allianz SE, had earmarked that bonus pool for Dresdner staff last autumn. Commerzbank acquired Dresdner Bank from Allianz in January. Commerzbank also received 18.2 billion euros ($25.4 billion) in aid from the German government and agreed not to pay its top executives any bonuses for two years.
On the surface, the Dresdner / Commerzbank situation resembles that of Bank of America and Merrill Lynch. However, BofA isn't thought to be making any efforts to "review" or claw back up to $4 billion in bonuses that John Thain, Merrill's ousted chief executive, paid to Merrill staff days before BofA completed its purchase of Merrill on Jan. 1. (Some U.S. lawmakers are looking for ways to recover those payments to Merrill employees.)
The divergence in how banks are handling the delicate question of bonuses reinforces common perceptions of differences between European and U.S. business culture. Well before the current crisis, European executives were viewed as both more restrained on pay and more sensitive to political opinion and government guidance, than their American counterparts.
Although most Wall Street chief executives and their top lieutenants took no bonuses for 2008, they are drawing intense criticism for year-end payouts to all employees that on an industry-wide basis are near the levels paid for 2004, when most institutions reported profits.
It remains to be seen how the political and competitive repercussions will play out on either side of the Atlantic.