In an apparent move to boost transparency, Switzerland’s second biggest bank Credit Suisse has decided to defer bonuses of more employees.
The threshold of bonus was reduced to 50,000 francs in 2010 from 125,000 previously, meaning more employees have to wait longer before they can see the money, said the Zurich based bank. The bank will be able to preserve cash in the short term as bonus deferral rate went up between 35 and 70 percent.
“These changes were designed to ensure adequate consideration of risk in compensation decisions and to better align the interests of employees with the long-term success of the bank”, the bank said in an issued statement.
The Basel Committee on Banking Supervision’s task force had said in a report said last month that executive remuneration should be linked to the amount of risk taken rather than irresponsible investing and be transparent to the investors. The practice of paying hefty annual bonuses were responsible for the financial crisis, the task force had concluded and recommended bonus payouts to long term performance of employees.
Shares to be distributed as part of compensation will be vested with the bank and allocation will be spread over four years starting 2012. Bonuses of directors, Executive director and the Managing Director will be split in cash and shares. Payouts will depend upon the Return on Equity (ROE) and performance of particular divisions.
Employees below the rank of directors will receive their deferred bonuses in shares only, the bank disclosed.