Credit Suisse unveils bonus innovation
19 December 2008
Investment bankers at Credit Suisse will be paid bonuses in equities linked to the “toxic” assets that contributed to the credit crunch, it has been revealed.
As the fallout from the world financial crisis continues, the bank has placed all of its risky illiquid assets in a pool worth £3.2 billion and will pay bonuses that are dependent on the outcome of these assets. This means that staff eligible for the bonus are not likely to receive any cash from it for at least five years, and probably at least eight, it has been reported.
The scheme will apply to all of the more senior employees among the Swiss bank’s 20,000 investment staff, including those who had nothing to do with the tarnished assets.
Brady Dougan, chief executive, told staff: “While the solution we have come up with may not be ideal for everyone, we believe it strikes the appropriate balance among the interests of our employees, shareholders and regulators and helps to position us well for 2009.”
With all investment banks having to reconsider their bonus schemes in the light of the credit crisis, Credit Suisse is not the first to come up with an innovative solution.
UBS unveiled a system recently that awards “maluses” alongside bonuses to reflect the negative outcomes of an individual’s actions on ongoing basis. Morgan Stanley has also introduced a “clawback” element to its bonuses and cut the level of payouts in half.
Meanwhile even Goldman Sachs, which is widely seen as having fared the best in the sector during the crisis, has reduced bonuses by an average of 46 per cent.