variable compensation

Commerzbank eliminates most individual bonuses in revamp

File photo of shareholder holding a Commerzbank bag ahead of the bank’s annual shareholder’s meeting in Frankfurt
Whose side? Source: Reuters

Commerzbank is revamping its bonus structure and doing away with individual bonuses for most non-union employees in Germany. Instead, bonuses will be set by department or group and will depend on the overall performance of that group as well as the bank’s performance.

Until now, managers awarded bonuses, which can comprise up to 30 percent of pay, to each individual according to their assessment. The bank believes the new system will resolve much of the frustration and disgruntlement employees have about the bonus system.

Employees abroad and those in Germany categorized as “risk takers” – that is, employees who contribute to the risk profile of the bank – will continue to receive individual bonuses.

Employees expressed frustration with old structure

The targeted value of the bonus for non-risk takers in Germany is set at two months’ salary, and that of risk takers at three months’ equivalent. Workers abroad receive more – 3.5 months for non-risk takers and 5 months for risk takers.

The head of the works council, Uwe Tschäge, welcomed the reform. The old system put managers under a lot of pressure, promoted competition among employees, and often seemed arbitrary, he said.

The announcement by Germany’s second-largest bank took those at other banks by surprise. New rules for compensation are complicated, they said, but it is hard to imagine that everyone, especially among managers and investment bankers, will be happy with the new system, one top executive said.

Removing incentive?

Labor lawyer Marc Repey at the Abeln law firm was also skeptical. “Virtually all other big banks rely still on individual bonuses for non-union employees,” he said, “since it is for many an additional incentive.”

High corporate payouts have at times triggered criticism from politicians. Bank CEO Martin Zielke and CFO Stephan Engels were also unhappy about the high compensation for many investment bankers.

The new system goes into effect from the beginning of next year. The new rules affect some 20,000 non-union employees at the bank.

Yasmin Osman and Andreas Kröner cover banking for Handelsblatt in Frankfurt. Darrell Delamaide adapted this story into English for Handelsblatt Global. To contact the authors: osman@handelsblatt.com and kroener@handelsblatt.com.

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