If anyone has sympathy for Andrea Orcel, it should be the men at the head of Deutsche Bank's fixed income business. They surely know what it feels like to be tied in by big deferred bonuses which make it kind of hard to find a job elsewhere.
Bloomberg revisits Orcel's dilemma in an article today. With anything from $40m to $60m in bonuses left on the table from his time at UBS, no bank (seemingly) willing to buy him out and UBS unwilling to allow him to work anywhere else in finance whilst his bonuses vest over the mandatory seven year period, Bloomberg notes that Orcel faces a tough choice. - He can either retire from banking and collect his $40m-$60m from UBS between now and 2026, or he can find a finance job elsewhere and forego rather a lot of money. For a man of 55 years-old with a predilection for running up hills and working long hours, it's a difficult choice.
Senior staff at Deutsche Bank aren't in exactly the same situation as Andrea. - They're not facing premature retirement. They are, however, tied-in to Deutsche Bank by very big deferrals (the value of which keeps declining in line with the DB share price) and are unlikely to get these entirely bought out if they find jobs at rival houses.
Like UBS and Andrea, Deutsche Bank has helped create this dilemma. Under UK regulations, senior managers in investment banks have their bonuses deferred for seven year periods, with vesting occurring in equal portions between years three and seven. Deutsche Bank, however, has taken things one step further: its own executives receive deferred compensation awards that vest only in years five, six and seven (ie. they have to wait two years longer before they get anything), and its 'senior leadership cadre' (defined as people who report to the management board, significant influencers and “stewards” of the bank’s long term health and performance) have their bonuses deferred in their entirety for 4.5 years, after which they vest all at once.
If you've spent a long time working for Deutsche Bank, therefore, the chances are that you've got rather a lot of deferred bonuses still on the table.
Forty one year old Ioannis "John" Pipilis, who heads up Deutsche's fixed income division seems Deutsche's most prime candidate for Orcel syndrome. Pipilis joined DB back in 2000 and became head of credit structuring in 2007. He's occupied senior roles in fixed income ever since. No one knows exactly how much Pipilis earns, but last year Deutsche paid three people over €7m and the chances are that Pipilis was among them. That money won't be available to its recipient until late 2022 and has already declined by up to 51% in line with Deutsche's share price. So what do you do? - Stay at Deutsche and risk it declining further, or try to find a job elsewhere on the understanding that you either won't get that money bought out at all or will have it bought out at a much reduced rate? Welcome to 2019.
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