Dresdner Bank's promise of a minimum bonus pool was aimed at keeping its bankers working hard and preventing an exodus of staff after it hit trouble more than three years ago, the former head of the business told a London court on Monday.
More than 100 London-based bankers are suing Commerzbank
Dresdner had considered giving each member of staff a formal letter and amount, but opted to tell employees at a meeting there would be a guaranteed minimum overall bonus pool of 400 million euros, Stefan Jentzsch, former head of Dresdner's investment bank arm, told London's High Court.
We wanted people to retain a certain amount of uncertainty about how much they would be paid to make them work hard, said Jentzsch.
He said the aim was to keep staff to ensure the stability of the firm, to satisfy regulators worried about upheaval, and to reassure bankers there would be a significant bonus pool.
The high-profile battle, which comes at a time of increasing public anger at bank bonuses, hinges on whether promises made to bankers are legally binding, and whether Commerzbank could slash the promised payout.
Jentzsch said Dresdner's human resources department had no objection to the promise made to the investment bankers.
We made a commitment or promise for the employees in return for expecting the employees to deliver something in return, and nobody raised the point we would have to follow a different procedure, said Jentzsch, who took the stand as a witness for the claimants.
Jentzsch left Dresdner in January 2009 after it was bought by Commerzbank. He is now a partner at financial services firm Perella Weinberg Partners in London.
Commerzbank Chief Executive Martin Blessing said under cross-examination last week his company had broken the promise to bankers, but said it had been the right decision after the collapse of Lehman Brothers deepened the financial crisis.
The bankers, whose claims range from around 15,000 euros to 2.6 million, have said the lender's financial woes had little to do with its legal obligations.
(Reporting by Michelle Martin; Writing by Steve Slater; Editing by David Cowell)