A court case in Germany is still in court debating the compensation issues that plagued some bankers during the financial crisis.
Namely, who should be penalised if one party made considerable amounts of money during the crisis while its employer lost money?
A group of 104 bankers in Germany is still in court over the issue. They are suing Commerzbank for not honouring their bonus contracts when the bank bought Dresdner Kleinwort.
The bankers claim that when Commerzbank bought Dresdner Kleinwort, their contracts with Dresdner remained intact. Thus their agreement with their former employer to pay them shares from a €400 million bonus pool should be honored.
Commerzbank argues that Dresdner was insolvent, and therefore might not have been able to pay its employees anything if Commerzbank had not bailed it out.
It says that Dresdner’s losses for 2008 – which amount to €6.3bn – materially changed its responsibility to pay bonuses, according to the Telegraph. And it claims that the bonuses are discretionary, not guaranteed.
The case is similar to what happened in the U.S. after the financial crisis, when bankers fought to be paid their bonuses after their firms were bailed out by the Fed.
The difference would be that when ownership switched hands from Dresdner to Commerzbank, the contracts might have been renegotiated, like when Bank of America bought Merrill Lynch, whereas when AIG, for example, took billions in taxpayer bailout, it remained the owner with the duty to pay or dispute bonus contracts. (In some cases, AIG ended up getting bonuses back.)
The case has been going on for a while now, and the bankers just caught a huge break when Commerzbank lost a bid to dismiss the case. Now the bankers and Commerzbank are back in trial after a seemingly sympathetic judge in the appeal court (the bankers lost their first attempt, then appealed the decision) said, according to the Telegraph:
“I see no reason why a promise of a guaranteed minimum bonus pool cannot be contractually binding even though the individual employees cannot at that time point to an entitlement of a specific bonus payable out of it.”
“At the very least, each of them would be entitled to nominal damages.”