Deutsche Bank Scraps Bonus for Management in 2015
Trouble for Deutsche Bank: Behind Moody's Credit Rating Downgrade
No bonuses for the management board
As discussed in the previous part of this series, Germany-based Deutsche Bank’s CEO has been under tremendous pressure to bring about cost efficiencies and turn the bank around. As part of its strategic plan, Deutsche Bank (DB) did away with bonus payments to its 10-member board in 2015 as a “matter of justice.”
John Cryan, Deutsche Bank’s CEO, said that it would be inappropriate not to scale back variable compensation for its board members as the bank is in a process of restructuring and cutting down expenses. The company cited mounting legal expenses and huge losses in 2015 as the primary reasons for the bonus cut. Annual bonuses for employees were 17% lower in 2015 (on a constant currency basis). However, the company increased fixed pay to compensate for the loss of variable compensation.
Pressure to cut back expenses
Cryan has been under tremendous pressure to cut down on expenses, strengthen capital, and drive value for shareholders after the bank has become the worst valued stock among global banks (KBE), including UBS, Credit Suisse (CS), Goldman Sachs (GS), and JP Morgan Chase (JPM).
According to the bank’s annual report, it paid 756 employees more than 1 million euros, or about $1.12 million, in 2015, less than what it paid its 816 employees in 2014. The company announced bonuses worth 2.41 million euros, or about $2.7 million, for the year, down from the 2.71 million euros, or just over $3 million, paid in 2014—a 17% YoY (year-over-year) drop on a constant currency basis. Variable compensation at the investment banking unit was 1.45 billion euros, or about $1.62 billion—15% lower than in 2014.
Overall, total compensation increased by 5.1% YoY to 10.5 billion euros, or about $11.7 billion, and headcount rose by 3% to 101,104 employees in 2015.
The company has also cut down on dividend payments for its investors. Keep reading to find out why.
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