Maybe Credit Suisse's cash bonuses were a great thing after all
When it became apparent that Credit Suisse bonuses were being paid in cash, again, this year, the revelation wasn't entirely popular. In light of recent events, Credit Suisse's cash bonuses look like a good idea.
Since Credit Suisse announced its bonuses on February 7th, its share price has fallen 30%, with a 15% decline in the past five days alone. If bonuses had been paid in deferred stock, this would have been an issue. Because bonuses were paid mostly in cash, it's not.
Credit Suisse's cash bonuses have a few downsides and come in two varieties. If you earn over $250k, the cash is able to be clawed back - plus income tax - if you leave within three years. If people depart CS within 12 months of receiving their bonus, the entire thing is clawed back by the bank. If they leave within 25 months they have to repay 50%, and if they leave within 36 months they have to repay 25%.
However, Credit Suisse has also paid cash bonuses to its associates and vice presidents (many of whom are earning above $250k according to a recent compensation survey), with the cash vesting in three tranches in April, July and October. If those bonuses had been paid in stock, things would have been painful.
The cash bonuses have therefore helped isolate Credit Suisse employees from the falling share price after what was already a painful bonus round. The bank said in February that it had cut the overall bonus pool by 50%, although MDs were to be worst hit by the cuts. At more junior levels, they didn't seem too bad: the Litquidity salary and bonus survey said US analysts and associates at Credit Suisse earned more than at US banks for 2022.
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