Credit Suisse intends to overhaul its top employees’ bonus programme, which will cost $380 million
Credit Suisse intends to overhaul its top employees’ bonus programme, which will cost $380 million :- The Swiss banks board will seek shareholder approval for awards if executives can successfully execute a radical restructuring.
According to people familiar with the matter, Credit Suisse’s top executives will share a SFr350mn ($380mn) bonus pool if they successfully execute a radical restructuring designed to restore the bank’s fortunes.
The board of the Swiss lender has devised a bonus plan for the top 1 percent of staff, equivalent to about 500 senior managers. The plan is designed to sustain morale during a difficult period for the bank as it embarks on a sweeping overhaul.
The board is preparing to put forward a special transformational award as part of the pay report to be voted on at the banks annual meeting on April 4, the people said. It has contacted shareholders ahead of the meeting to ask if they will support the award, they added.
However, top executives at the bank are expected to miss out on a bonus this year after what chair Axel Lehmann described as a “horrifying” 2022.
Credit Suisse is set to report its second annual loss in a row on Thursday, with the final quarter of last year being overshadowed by a damaging exodus of clients following a spate of rumors about the bank’s financial health. Analysts estimate that total losses for the year will reach SFr72bn.
Credit Suisse is cutting 9000 of its 52000 employees, spinning off its investment bank, and reviving the First Boston name, as part of its restructuring plan. The plan also includes beefing up its wealth management business.
According to people familiar with the matter, the longterm incentive bonus would be tied to the bank’s return on tangible equity and its spending – two metrics at the heart of the restructuring first announced three months ago.
Under the plan, if a manager achieves a group return on equity of 6 percent by 2025, they would be awarded a bonus on a sliding scale. If the ROE hits between 5 percent and 75 percent, the manager would receive a bonus.
The executives would need to keep the banks’ spending below SFr145bn in order to receive their minimum payout of SFr14bn or maximum payout of SFr15bn.
A spokesperson for Credit Suisse declined to comment on the proposed bonus plan.
The goal of the restructuring plan is to reduce the group’s costs by 15% or SFr25bn to SFr145bn by 2025. A large portion of the savings will come from reducing the bank’s workforce.
In an effort to both restore profits and retain key staff, Credit Suisse has taken a creative approach to rewarding staff.
The company increased the amount of cash that directors and managing directors received as part of their annual bonus last year, with those earning more than 250,000 seeing a larger proportion of their bonus paid out upfront.
Credit Suisse has begun offering a similar deal to senior staff this year. However, the small print stipulates that bankers would have to give up some of their cash bonus if they left within three years. This stipulation has already sparked the threat of lawsuits from departed employees wishing to keep hold of their awards.
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