£11m Schroders slip but bonuses survive

Schroder, the fund manager that has angered its City rivals with its extravagant pay deals, has admitted that no executives will lose out as a result of the £11m accounting error revealed last week.

The group revealed that it had overstated profits in 2000 by as much as £11m through a bookkeeping error. The news sent its shares down 4 per cent. Schroder is deciding how it will deal with the adjustment for the problem. It will either make a provision in its current year's figures or make a prior-year adjustment.

Even if it makes no adjustment for current figures, profits are expected to fall by more than 60 per cent to £63m. But a spokesman for Schroder said the "adjustment would not be material as far as it affects bonus payments."

Schroder has courted controversy with its remuneration policies. When it sold its merchant banking operations to Citigroup, it was widely criticised for making ex gratia payments to executives, including a £5m bonus for its departing chairman, Sir Win Bischoff.

The National Association of Pension Funds – of which Schroder is a member – advised its members to vote against the bonus plan. But Bruno Schroder, who owns 47 per cent of the group's shares, voted in favour, so the plan went through.

More recently, the company was berated for the massive pay deal awarded to Michael Dobson, who was brought in as chief executive after the sudden resignation of David Salisbury. Mr Dobson will receive £3.5m a year for three years, and is also guaranteed a pay-off of £3.5m if he is forced out of the company.

Mr Dobson is working on a restructuring plan for Schroder. Though he said it would not involve "signif- icant" job losses among the fund managers, Schroder staff are concerned that the back office functions will be hit.

The new chief executive has signalled that he may outsource at least two back office areas, retail funds administration and IT. This could lead to more than 400 people leaving Schroder, though most would be re-employed at the outsourcing contractors.

Mr Dobson is a former head of the fund management operations of Deutsche Bank, which this week is expected to hand redundancy notices to up to 100 executives in its corporate finance operations.

The group admitted over the Christmas break that it was going to cut 2,100 jobs worldwide in its investment banking business, and 350 of those were likely to be in London.

It has been assessing which staff should leave the group and the news is to be broken to the unlucky executives in the next few days.

Deutsche has been riven by internal wrangling in recent months and has also held merger talks with Lloyds TSB.