Mellon pays bonuses after delaying annual raises
Bank of New York Mellon Corp. paid about $460 million in annual bonuses to managers at the end of February — days after it told lower-paid workers their annual merit increases will be delayed.
The bonuses were paid two weeks after BNY Mellon said it lost a tax case that will carve $850 million out of its earnings this quarter, likely leading to its first quarterly loss in almost four years.
Based in New York, BNY Mellon employs about 49,500 worldwide, including about 7,600 in the Pittsburgh area, mostly Downtown.
The bank paid out more than 100 bonuses on Feb. 28, six days after rank-and-file workers received word that their pay raises, normally awarded in April, were put off until July, according to bank sources.
The range of bonuses and an exact number of recipients were not available.
“All the people who were bonus-eligible received their bonuses at the end of February,” said BNY Mellon spokesman Ronald Gruendl. He cautioned against calling them “executive bonuses” but would not say how many people received them, what the payments were based on or how amounts were determined, calling the information “proprietary.”
Gruendl confirmed annual pay increases for the rank-and-file would take effect in July but would not say why they would not be paid in April as they traditionally had been.
The head of an organization that studies corporate ethics questioned the timing of the bonuses.
“Compensation needs to be uniform up and down the organization,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware,
“Ideally, you should deal with every employee on the same basis,” he said. “And to maintain good morale, you have to give a good reason for these payments.”
He said companies sometimes are bound by contract to award bonuses.
The $460 million in bonus payments were made two weeks after the bank said it will book an $850 million expense in the January-March quarter because of a U.S. Tax Court ruling.
Given the heavy expenses, BNY Mellon is expected to post its first quarterly loss since the July-September 2009 quarter, when it lost $2.46 billion. The bank is scheduled to report financial results in mid-April.
Executive bonuses and taxes are among the expenses charged against earnings.
The bank is appealing the Feb. 11 tax ruling, which stemmed from an Internal Revenue Service challenge to BNY Mellon's claim of $199 million in foreign-tax credits in 2001 and 2002.
The tax credits relate to a transaction arranged by London-based Barclays Bank plc and accounting firm KPMG.
In addition, BNY Mellon continues to face lawsuits in several states that were brought in 2011 involving its foreign currency exchange business.
The lawsuits allege that BNY Mellon for 10 years traded foreign currency for clients at one price and charged them a different price based on daily highs and lows. The claimants, mainly pension funds, say they are owed a total of $2 billion.
The bank denies those claims and is to present arguments in federal court in New York this month for a dismissal of the case.
Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or email@example.com.
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