Later On

A blog written for those whose interests more or less match mine.

Big bonus for total failure

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Something is seriously out of whack in the way Big Business works. John Waples and Danny Fortson report in the (London) Times:

Staff at Lehman’s New York office who helped to cause the world’s biggest corporate bankruptcy are to share in a $2.5 billion bonanza.

The bonus, which has been described by London staff as a “scandal” has been pledged by Barclays Capital, the British-based bank that last week acquired Lehman’s American operation and took on 10,000 staff.

The $2.5 billion (£1.4 billion) pot, which has been ring-fenced as part of the acquisition, has caused huge resentment among the 5,000 staff in the firm’s European and Middle Eastern operations who are not guaranteed to be paid after this month. There are, however, hopes that half the jobs in Lehman’s Canary Wharf office could be saved today by either Barclays or Nomura. Bids are being submitted for its UK equities and investment-banking business.

A Chapter 11 bankruptcy document filed by Lehman Brothers Holdings Inc says that Barclays has identified eight individuals out of the New York staff of 10,000 who are vital to make the deal succeed and a further 200 who are identified as “key”. It is thought that these eight directors will be locked into two-year contracts worth between $10m and $25m a year.

The $2.5 billion had been accrued as part of the contribution to Lehman’s group profits for the first nine months of the year. Barclays said there is no obligation to pay it out but analysts say the competitive pressure to keep key staff means he will have to. [The same “key staff” that drove Lehman Brothers into ground. Wow. Got to keep them. – LG] Bob Diamond, president of Barclays Capital, said: “You can expect us to manage this with the same discipline and performance terms that we have at BarCap”.

The biggest bonuses are likely to be for Michael Gelband, the bank’s global head of capital markets, and Eric Felder and Hyung Soon Lee, global co-heads of fixed income.

Barclays has asked all 10,000 employees to attend work tomorrow at the bank’s Manhattan headquarters. Over the next three months

it will decide how many to keep and will use some of the bonus to meet remuneration packages. It is thought several thousand could be made redundant.

One London-based Lehman employee said: “It’s an absolute scandal. I will never work for an American firm again. It looks like they are prepared to cut you off at the knees. Nobody from America has been in touch since we went into administration on Monday.”

Another said: “Every other financial institution has been saved, including Lehman Brothers in the US, but it’s another story for the employees in Europe.”

Lehman has attempted to demonstrate in recent years that it is a global united company. Its mission statement says: “We are one firm.”

Price Waterhouse Coopers (PWC), the administrator to Lehman’s European operation has demanded that the firm repay £4.4 billion that was transferred from the UK to Lehman’s US holding company just hours before the firm collapsed. This left London with no money to pay staff. …

Continue reading.

Written by Leisureguy

22 September 2008 at 9:31 am

Posted in Business, Daily life

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