Credit Suisse’s new bonus plan is causing resentment among senior managers. Many have swallowed the bitter pill but are gagging on it, research by finews.ch shows.

Directors and managing directors at Credit Suisse (CS) had one working week to show their colors. Those who did not agree to the new bonus structure were in danger of being left empty-handed when it came to compensation for 2021.

But as was learned from senior management at the troubled bank, displeasure over the new bonus rules announced at the end of January is still reverberating.

Additional reporting by finews.ch revealed CS offered senior executives an immediate cash bonus. The catch, however, was it would have to be paid back on a pro-rata basis if the executives left the bank within three years. Also on offer was a stock plan whose securities were vested after three years. In other words, a bonus that may seem like a joke to some bankers.

Salaries Below 250,000 Francs Impacted

In Switzerland at least, many of those affected have decided to swallow the bitter pill, with very few refusals, according to several sources. But some executives, including directors, earning less than 250,000 Swiss francs are balking and will not be deterred from leaving the bank before 2025. 

They are reportedly prepared to accept that CS will take legal action against them, and preparing for legal disputes or contacting their legal protection insurer. Given there are hundreds of senior executives in the group, a wave of lawsuits could hit the bank, which declined to comment when asked about the matter.

Delicate Balancing Act

In view of Credit Suisse’s billion-dollar loss in 2021, the starting position for February's bonus season was a delicate one. While its competitors were paying out record bonuses, Switzerland's second-largest bank saw its bonus pool slashed by a third when the Swiss Financial Market Supervisory Authority (Finma) intervened to pump the brakes, according to media reports.

With the increased, but conditional payments, CS is attempting a balancing act of satisfying executives financially, while binding them to the company in the medium term. 

«When it comes to executive compensation, Credit Suisse takes care to ensure that the interests of shareholders and other stakeholders are appropriately taken into account. As we have already announced, we will align compensation even more closely with our new strategic objectives, particularly with regard to our risk management focus,» according to a statement from the bank. 

Bonus to be locked away?

The seemingly urgent change of heart among key executives does not necessarily indicate increased loyalty to the bank. Financial professionals who, by profession, strive for wealth preservation, are irritated by the fact that bonus "clawbacks" are made at gross value. 

The upshot of this is while pension benefits have already been deducted from the compensation upon receipt, they are also taxable later. «Actually, there is nothing else to do but transfer the cash portion to a blocked account right away,» says a source.

But bank executives, who are used to paying taxes with their bonuses and often have considerable private obligations, will not always find this easy.