New York Securities Lawyer Blog
Recently, Deutsche Bank reviewed its current pay practices, particularly those regarding executive bonus compensation, in order to bolster profitability and decrease its overall costs by $5.8 billion. After a 100-day evaluation conducted by the firm’s new co-chief executive officers, Juergen Fitschen and Anshu Jain, Deutsche Bank is expected to implement changes to its expense management measures. In a statement released on September 11, 2012, Deutsche Bank confirmed that it hopes to revamp its financial plan in which it noted, amongst other schematic changes, its intent to transform its current compensation practices. See the Deutsche Bank 9/11/12 Statement here. Deutsche Bank stated that, in the event of a reduction in profit or an instance of transgression, employee bonuses will be suspended. This policy will apply to chief executives and will amend the current payment schedule for deferred bonus payouts from part-payment throughout the span of three (3) years to payment after five (5) years. There has been a great deal of industry and media attention surrounding this anticipated announcement, since it is a primary concern for the entire investment banking industry and regulators. Indeed, several European banks are being scrutinized by investors, politicians and regulators, most of whom believe that employee accountability for actions resulting in lost profits should be more closely linked to their yearly bonuses. This type of bonus policy was first introduced by UBS Financial Services, Inc. (“UBS”) in 2008 after it announced its decision to “clawback” employee bonuses. Such “clawback” provisions allow for the employer to either reduce or fully eliminate the deferred parts of bonuses that have not yet been paid out to employees. A recent example of this growing practice is espoused in JPMorgan’s July 2012 announcement that it intends to “clawback” executive bonuses from executives involved in a $5.8 billion loss originating in its London office and related to the London “Whale” blunder. At Lax & Neville LLP, we represent individuals, securities industry employees and securities industry companies seeking representation in employment matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.