Deutsche Bank AG co-Chief Executive Officer John Cryan, almost five months into his revamp of the firm, said bankers still earn too much money and are often promised rewards too quickly.
"Many people in the sector still believe they should be paid entrepreneurial wages for turning up to work with a regular salary, a pension and probably a health-care scheme and playing with other people's money," Cryan said at a conference in Frankfurt on Monday. "There doesn't seem to be anything entrepreneurial about that except the compensation structures."
Cryan, who took over as co-CEO of Germany's biggest bank from Anshu Jain in July, elaborated on his philosophy for paying employees Monday — even taking aim at his own compensation package — just weeks after broadly warning that staff bonuses will have to reflect the cost of the firm's fines for past misconduct. Managers need to slow the bonus process so employees aren't rewarded for work before it comes to full fruition, he said. He also expressed concern that too many people have senior titles.
The bank needs to "recalibrate" the way it pays staff to reflect the period they generate value, Cryan said Monday, noting that traders generate profits over a shorter period of time than the company's corporate bankers or asset managers.
"We should reflect on people's contribution over a much longer period of time than one year," he said. Nowadays, there is a "promise to pay first and then be in the ridiculous position where the baby's been given the candy and you've got the difficulty of taking it away."
'Fancy' Titles
Turning to titles, he said there are sometimes several layers of managing directors, diluting the importance of that rank.
"There is some value to carrying a fancy card if you are a banker because it is true that you get a better quality meeting with a client if you sound grand," he said. But for traders, it's prowess that's important. "The title is never used in the context of the day-to-day business," he said.
Deutsche Bank typically communicates and pays bonuses to staff in the first quarter of any given year. As part of a cost-cutting plan, the lender may shrink the bonus pool for its investment bank, the largest securities firm in Europe, by as much as 500 million euros ($531 million), or almost a third, people with knowledge of the matter said last month. The shares have dropped 3.3 percent this year.
"This is the pinnacle definition of a warning shot," Jason Kennedy, the head of recruitment firm Kennedy Group in London, said of Cryan's remarks. "With continuous and unforeseen fines, their first priority is to build capital rather than pay their employees. By saying what he's said, Christmas has been canceled."
