Germany: Commerzbank adopts new pay system oriented towards long-term success

New bonus-malus system. Saved from bankruptcy in 2008 when the State gave €18.2 billion, the Commerzbank is the second bank in German after HVB to deeply reform its bonus system. This reform was a requirement for the State rescue of Soffin banks. It also greatly applies the principles listed in the new act on managers’ income, enforced last summer (see our dispatch No. 090660). It will apply to the 500 senior executives of the bank and about 22,000 executives who aren’t covered by collective agreements, including 2,000 traders. The fixed part of their salary won’t change. However, the 500 senior executives will see the variable part granted as bonuses, which will only be paid after three years. Therefore, their amount will depend on the mid-term evolution of the bank’s shares. However, and this is new, these executives may also loose their rights if the bank thinks they took too much risk, and this will even be more serious for traders. Thus, in the future, two thirds of investment bankers’ variable pay will be paid later. The first third will be paid as bank shares. The second will be put on a special account (“Bonusbank”). If some objectives aren’t fulfilled, the trader may loose some or all of the amounts put on that account.
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will only be paid after three years. Therefore, their amount will depend on the mid-term evolution of the bank’s shares. However, and this is new, these executives may also loose their rights if the bank thinks they took too much risk, and this will even be more serious for traders. Thus, in the future, two thirds of investment bankers’ variable pay will be paid later. The first third will be paid as bank shares. The second will be put on a special account (“Bonusbank”). If some objectives are

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