Forget Brady Dougan, some Credit Suisse MDs in London are expecting $20m+
Yesterday, Brady Dougan, chief executive of Credit Suisse, emerged as one of banking's best paid CEOs.
Dougan is set to receive CHF19.2m ($17.9m) in cash and stock for 2009, more than Jamie Dimon ($17m), Lloyd Blankfein ($9m), or Josef Ackermann (€9.6m or $12.8m).
However, Dougan's package pales into insignificance compared to the amounts some Credit Suisse managing directors in London are said to be expecting over the next few weeks.
As the Financial Times reported last September, in 2005 around 300 Credit Suisse managing directors and senior executives were entered into a performance incentive plan (PIP). It's due to pay out this spring.
Headhunters say the payment date is, in fact, early April, and that the amounts involved are very large indeed. "Some people are expecting $20-$30m. And once it's vested they're free - this is a legacy scheme so there are no clawback provisions. A lot of people are going to take this as a retirement trade," says one.
Last September, the FT said the total value of the scheme - said to be dependent on the Credit Suisse share price - was CHF1.9bn. Since then, the share price has declined around 9%, although the Swiss franc has appreciated by around 5% against the pound.
The scheme appears to seal Credit Suisse's reputation for being both a generous and canny payer. The bank has managed to pay well throughout the financial crisis, whilst avoiding the opprobrium heaped on the likes of Goldman Sachs. The toxic debt bonus scheme it implemented in 2008 increased in value by 72% over 12 months, for example.
Comp at Credit Suisse from now on
Yesterday, the bank issued details of the new payment arrangements along with its annual report.
Henceforth, bonuses below $100k will be paid in cash. Above that, varying amounts will be deferred subject to a (secret) table specifying compensation thresholds. Deferred
compensation will come in three different instruments with three different acronyms:
· Incentive Share Units (ISUs) - Issued to employees up to, and including, VPs. Vest equally over three years. Related to the Credit Suisse share price, with additional units awarded if the share price increases.
· Scaled Incentive Share Units (SISUs) - Issued to directors and MDs. Vest equally over four years. Similar to ISUs, SISUs are related to the Credit Suisse Group share price, with more awarded if the share price increases. However, in the case of SISUs, this 'multiplier' effect is also linked to the group average ROE - if the ROE is higher than specified at the start of the four year period, additional SISUs are awarded.
· Adjustable Performance Plan (APP) Cash based plan for MDs and directors. Vests equally over three years. APP awards are adjusted according to the profit or loss of the business area an employee works in. If the business area is profitable, APPs are adjusted upwards taking into account the ROE. If a business area isn't profitable, APPs are adjusted downwards, regardless of ROE.
For CS managing directors and directors, compensation will be structured as per the chart below:
