CEO Admits That Firm Broke Bonus Promise

104 former Dresdner Kleinwort bankers have taken their bonus case to the UK High Court.

At issue is around $65m of bonuses the bankers claim they should have received for their work in 2008.

The bankers claim that, in order to lock in key staff after the announcement in 2008 of Dresdner's sale to Commerzbank, Dresdner allocated a $524m guaranteed bonus pot to be paid out in early 2009. They say that former Dresdner Kleinwort CEO Stefan Jentzsch confirmed during a 'town hall' meeting in August 2008 that the pot of $524m was firm, although the allocation between bankers was discretionary.

In the event, the bankers claim only around 10% of the retention bonuses were paid out, and they want the rest of their money.

Commerzbank, which closed the deal for Dresdner in early 2009, says that the bonuses weren't due as Dresdner Kleinwort made huge losses in the final months of 2008, and that Commerzbank itself had to be bailed out by the German government partially as a result. Commerzbank said that it would be wrong to effectively use German taxpayer money to pay the bonuses.

The court testimony below illustrates very well the opposing views on this bonus issue:

'When you spoke to people outside the market, especially parents, there was a certain amount of incredulity about what was going on.

Mostly they were saying to me: 'Steve, this must be some kind of mistake. You've got to stick it out (and) battle it out from the inside'.

'I was obviously very disappointed not to have been paid'.

Asked how he interpreted the words of Stefan Jentzsch, Dresdner Kleinwort's then CEO, head who set up the bonus pool at a time when the Financial Services Authority was concerned about a destabilising staff exodus, the banker said:

'He was basically saying: 'You can stick it out here ... get your nose down, keep working, keep pushing ... and those that perform well will do well''.

Steven Garrett, former head of interest rate options, Dresdner Kleinwort (Reuters)

'We broke our promise because given the circumstances it was necessary; it was the right thing to do... The only thing we don’t agree on is whether it was a binding commitment'.

Martin Blessing, CEO, Commerzbank (The Financial Times)

The trial continues.