For months, Deutsche Bank’s managers found themselves in the hot seat, pushed to explain why they and their employees deserved generous bonuses despite letting the lender’s bottom line dip into the red for the third year in a row.
They blamed it on the Americans. After all, the government in Washington recently passed a tax reform that would let them weigh past losses against their tax burden. Their critics were still unmoved. The bank didn’t make a huge profit in 2017, they argued: So why should you?
After much deliberation, and even more dithering, Deutsche Bank CEO John Cryan recently announced that he and other top executives at Germany’s largest lender would not be receiving any additional compensation for their work last year. The employees, on the other hand, would.
Last year's bonuses are expected to reach between €2.1 billion and €2.4 billion
Without the effects of the United States’ newly passed tax law, Mr. Cryan said Deutsche Bank would have finally managed to turn a profit again: “It wouldn’t have been a huge profit, but a decent one that would have shown we’re on the path to recovery.” With this in mind, it would have been “a bit strict” to deprive employees of all financial reward, he said.
Bonuses will be “a bit lower” than in 2015, but much higher than they were in 2016. In 2015, those bonuses amounted to €2.4 billion ($3 billion), while in 2016, they only came out to €500 million. Last year’s bonuses are expected to reach between €2.1 billion and €2.4 billion and account for a fifth of total employee remuneration. The bank said it viewed bonuses as “investments” in its staff and noted more details would be released on Friday.
Those in the bank’s uppermost echelons, however, will get no more than their fixed salaries. “Given the loss in our bottom line, even if it only had to do with tax adjustments, we chose to forego bonuses for the third time in a row,” Mr. Cryan said.
That’s a new song for Mr. Cryan who, in February, said: “We didn’t find it necessary this year to call the board and say: If you’re thinking about variable compensation [for us], forget it.” Maybe it had something to do with Mr. Cryan’s admission that Deutsche Bank would do well to acknowledge the general mood vis-à-vis bankers and bonuses of the society in which it operates. Then again, maybe not. Certainly not every manager was eager to give up the extra money. Debate on the subject went on and on, banking sources said.
One perceived downside to managers foregoing their bonuses again was the lack of variable remuneration paid out in stock. Some of the bank’s executives now have little to no equity in the company, raising the question of whether they would do whatever it takes to maintain a high share price without some self-interest at stake.
Mr. Cryan can always fall back on his fixed salary of €3.4 million, the highest for a top executive in Germany. Then again, other bosses can count on bonuses.
Yasmin Osman is a Handelsblatt reporter in Frankfurt. To contact the author: firstname.lastname@example.org