Contractual rights and discretionary bonus pools: watch what you say

In Dresdner Kleinwort Ltd & Commerzbank AG v Richard Atrill & ors and Fahmi Anar & ors [2013] EWCA Civ 394, a ‘town hall’ announcement made by the chief executive officer of Dresdner’s investment banking business (known as Dresdner Kleinwort, or DK), to the effect that a ‘guaranteed’ minimum bonus pool would be made available to DK employees, was a contractually binding promise.

Made against the backdrop of the unfolding global financial crisis in 2008, an anticipated mass exodus of key employees and immediately prior to Dresdner’s acquisition by Commerzbank, DK could not renege on this contractual commitment to employees by subsequently introducing a ‘material adverse change’ (MAC) clause that attempted to make payment of the provisional bonus awards conditional upon the bank’s financial performance.

In spring 2008, Dresdner Bank AG announced its intention to separate its commercial and investment banking divisions through either a sale, downsizing or winding down of DK. Many investment bankers began jumping ship and considering resignation. The (then) FSA put Dresdner’s UK-regulated entities on its ‘Watch List’ and required it to take action to reduce the risk of losing key staff…

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