GAM CEO Cuts Bonuses and Signals Talks to Begin on Layoffs

(Bloomberg) -- GAM Holding AG Chief Executive Officer Peter Sanderson is cutting bonuses and signaling talks on layoffs will begin imminently as the company adapts to losing more than 40% of its key assets in a rogue trading scandal.

Bonuses will be cut since underlying profits are materially lower and the company will pay a higher proportion in deferred shares, Sanderson wrote in a memo to employees.

The Zurich-based firm is starting a process of consultation regarding a restructuring planned for this year and “HR will be in touch shortly,” he wrote, without saying how many employees will be affected. The CEO is weighing cuts of more than 40% of the workforce to restore profitability and fend off activists who have called for a review of the business, Bloomberg has previously reported.

A GAM spokesman said the process doesn’t envisage any changes to investment teams and more details will be provided with full-year earnings next month.

“As our underlying profits are materially down, this will inevitably need to be reflected in this year’s bonus pool,” Sanderson wrote. “Managers will be given their bonus pools shortly and it will be even more important that they differentiate performance and recognize our best performers.”

Sanderson, who took over last year, is starting to steady the firm after it was sent into a tailspin by the suspension of star trader Tim Haywood in July 2018. Since the scandal started, GAM has lost more than 40% of assets in the investment management business. Haywood’s funds, which were among the firm’s biggest, were liquidated and the manager was dismissed last year for gross misconduct. Haywood said in February that he was being made a “scapegoat.”

The asset manager on Friday said it expects to break even on a net income basis for the full year, news that was well received by investors and boosted the shares more than 10%, though still left the company far away from prior levels of profitability.

GAM plans to increase the proportion of bonuses paid in deferred shares this year, with 75% of any discretionary bonus above 50,000 Swiss francs ($51,658) to be granted now in deferred shares paid over three years, Sanderson said.

The changes won’t affect employees who participate in a bonus pool linked to the performance of the funds they manage, according to the memo.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Sara Marley, Rachel Graham

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