A cut to your bonus, Mr. Thiam? No sir!
“There should be no reward for failure” ring the words of many government officials in the memories of the British financial sector and the public alike, as a sentence that has been routinely used since the 2008 financial crisis. Just last week, British Chancellor of the Exchequer George Osborne unveiled a draconian new law which […]
“There should be no reward for failure” ring the words of many government officials in the memories of the British financial sector and the public alike, as a sentence that has been routinely used since the 2008 financial crisis.
Just last week, British Chancellor of the Exchequer George Osborne unveiled a draconian new law which will criminalize senior executives of banks who contribute to commercial failure, and provides legislation which would result in the courts being able to hand down jail sentences of up to seven years.
The new law assumes that senior executives in banks, building societies and what the British government considers to be important investment firms will be held liable under a criminal prosecution for offencese which include taking a decision which causes their institution to fail, being aware of a risk that a decision could lead to institutional failure or what is termed as conducting themselves in a way that is “far below that which could reasonably be expected of a senior manager in that position.
Clearly, some are more equal than others, as Credit Suisse CEO Tidjane Thiam sparked outrage last night when it was revealed that he had collected £5 million for just five months work whilst at his former employer Prudential before abandoning the company to join Credit Suisse, with most of his tenure in his new role as CEO of the company being spent during a time when the company has made its first annual loss since 2008, and over 4,000 jobs are set to be axed.
For those who remain at the company, a freeze on bonuses and payrises was instigated, affecting senior executives whose bonuses was cut by 36%, and Mr. Thiam himself actually stated earlier this year that he will be taking the largest hit by reducing his bonus.
Whilst at Prudential, Mr. Thiam was paid a £455,000 salary and £704,000 bonus, plus £3.7million in shares. In total he earned £48million in six years at the company before leaving to accept his new job at Credit Suisse.
Credit Suisse then proceeded to hand Mr. Thiam £13.7million for the rest of the year 2015, the year in which Credit Suisse sustained an annual loss of £1.65 billion and despite requesting a 40 per cent bonus cut.
Perhaps the most controversial aspect here is that it has been suggested by a number of analysts that Mr. Thiam earned his pay at Credit Suisse via a cost-cutting drive, which includes the redundancy of 4,000 employees by 2016, 2,800 of whom have already having left the company.
The entirety of the cost cutting exercise is set to cut £3.1 billion from the firm’s costs, which on the face of it appears efficient and in terms of black and white balance sheets, Mr. Thiam’s remuneration appears worthwhile considering the potential savings that could be made, however there may be questions relating to the ethics of being remunerated with large bonuses for deserting one firm and then factoring in a very high package from a new employer which currently has a loss-making business.