PrefBlog

The Ontario Securities Commission has released the new edition of Perspectives, which provides information on regulatory initiatives.

We have a new poster-boy for the banks’ pursuit of mediocrity, rivalling Canada’s David Berry. Ladies & Gentlemen, let’s hear it for Raphael Geys!

Raphael Geys, former managing director of European fixed income sales for French bank Societe Generale, claims he was summarily dismissed without cause in November 2007.

He said that during his three years at the bank he was responsible for more than doubling the gross revenue of his division, from 205 million euros to 440 million euros.

Deputy Judge George Leggatt QC was told at a hearing earlier this month: “He was dismissed for being too successful in that role because the provisions in his contract were considered by the bank to be too generous.”

It was claimed that the bank’s termination of the contract “raised issues about the claimant’s entitlement to termination and other payments due under the contract. Very substantial sums are at stake”.

These have been reported as being 12.5 million euros (£11.3 million).

The bank claims he is not entitled to any “termination payment” under the contract because he has taken legal action.

And now, he’s passed the first milestone:

Societe Generale SA, France’s second-largest bank, lost a U.K. court decision over whether an 8 million-euro ($10.6 million) severance package it offered a former employee was less than what he was owed.

Raphael Geys, a former managing director of European fixed income sales at Societe Generale, sued and claimed at a trial that began last week in a London court that under his contract’s terms he was owed more severance than the bank offered.

If a severance value can’t be negotiated, a trial will be held to determine the amount, Judge George Leggatt said in the ruling today. Geys, who was fired in November 2007, said he was entitled to more than 12.5 million euros under his contract. Societe Generale argued it no longer owes Geys any severance because suing breached his contract.

“I reject the bank’s arguments that the claimant has lost any right to receive a termination payment, or any other payment, as a result of making or pursuing any claims,” Leggatt said.

The bank may have saved itself about 2.5 million euros had it “appropriately” worded a November 2007 letter firing Geys, according to the judge. Leggatt said the company didn’t properly end Geys’s contract until months later, meaning Societe Generale owed him a year-end bonus.

Sarah Butcher of eFinancial News reports It’s not unusual for banks to fire over-performers:

Bizarrely, lawyers say it’s not at all unusual for banks to eject high performers with large pay claims, even if they’re making a profit for the firm.

“You’d think that banks would recognise that it’s sensible to keep these people onboard,” says Charles Ferguson, a solicitor who specialises in the representation of traders. “However, there are some banks where there’s a limit to what they’re willing to pay. If someone takes them above that, they’ll look for an excuse to back out.”

Most banks include clauses in their contracts specifying that you need to be in employment and not under notice at the bonus date in order to be eligible for a payment. As a result, redundancies in the run up to bonuses are abnormally common.

Equally, Ferguson says some contracts specify that profit sharing entitlements will disappear if salespeople or traders are sacked for gross incompetence. He says this is also a favourite reason for dismissal.

Hah! Us proud Canadians can teach them a thing or two about justification for firing, eh?

The Ontario 2010-11 Budget was introduced today. Not a word about dividends – probably a good thing! More worrisomely, they proudly announce that the current deficit will be eliminated in a mere eight years – which stands a good chance of being the next completely unexpected and totally unforecasted recession. In that time, a mere $88.9-billion will be added to the provincial debt … and debt charges will rise from 9.35% of revenue to 11.3%.

In the Canadian preferred share market, volume was heavy AGAIN, Perpetual Discounts were down AGAIN (losing 21bp) and FixedResets were up AGAIN (gaining 5bp). Yields on FixedResets are now at 3.38%.

This entry was posted on Thursday, March 25th, 2010 at 8:54 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.