China Fund News Sunrise
After the project "stepped on the thunder", is the individual employee responsible? Can I get a performance bonus for the project?
A few days ago, a civil judgment published by the China Judgment Documents Network showed that Shenwan Hongyuan Securities suffered a loss of more than 200 million yuan due to the explosion of a loan project of nearly 500 million yuan, and then withheld an employee's performance bonus and a total of 625,000 yuan in the historical retention of risk projects in the pursuit of responsibility. After the employee won the labor arbitration, Shenwan Hongyuan took him to court, claiming not to pay the above amount.
In this regard, the employees believed that the losses generated by the relevant projects were normal bad debt losses, and Shenwan Hongyuan should not link the company's losses with personal bonuses, and should pay according to the amount awarded by the arbitration.
When the two sides are in dispute, how does the court decide? Let's see the details——
Woe to the rain project
Caused an actual loss of 200 million yuan
First, let's look at the project that caused the dispute between the two parties:
According to Shenwan Hongyuan, from February to March 2015, Shenwan Hongyuan had a loan project (Yurun Project), that is, a working capital loan to Jiangsu A Group Co., Ltd. through a trust company, with a project scale of nearly 500 million yuan.
Compared with the information in the judgment, the project company of Shenwan Hongyuan's "stepping on thunder" should be related to the once famous Yurun Group. In the field of processed meat food, the market used to have the name of "South Yurun, North Shuanghui". Zhu Yicai, the actual controller of Yurun Group, has been listed on the "Forbes China Rich List" many times and has the title of "Jiangsu's richest man".
However, the good times did not last long, since 2015, Yurun Group encountered debt collection by many financial institutions, asset seizure and freezing, and finally went bankrupt and reorganization. In April 2021, the Nanjing Intermediate People's Court ruled to substantially merge and reorganize 44 companies including Nanjing Yurun and 78 companies including Yurun Holdings.
The project involved in Shenwan Hongyuan this time occurred before the collapse of Yurun Group. According to the judgment, after the issuance of the project loan of nearly 500 million yuan, Group A had a dispute with the trust company due to the outstanding repayment of the loan, and in May 2017, the Shanghai Municipal Higher People's Court finally repaid the trust company's loan of 490 million yuan, causing an actual loss of more than 200 million yuan to Shenwan Hongyuan.
Sun Mouhua also said in the trial that the Yurun project was a trust loan contract signed between Group A and a trust company, and Shenwan Hongyuan handed over the raised funds to the trust company to issue loans, and "Shenwan Hongyuan eventually returned the people's money."
Shen Wanhong began to carry out a risk investigation on the project in 2018, and finally in April 2021, the company's party committee resolved that Sun Mouhua, as the leader of the project review team, had violated discipline in the evaluation and lending process of the project, and decided to impose an economic penalty of 625,000 yuan, including the annual performance bonus in 2020 and the performance award withheld at the rate of 40% of the annual performance bonus since Sun Mouhua joined the company in July 2013, that is, "historical retention of risky projects".
In this lawsuit, Shenwan Hongyuan claimed that Sun's dereliction of duty included three points:
First, in the January 2015 evaluation opinion of the Yurun project, the purpose of the project loan was stated as "to supplement working capital", which was inconsistent with the purpose of "for the construction of aquaculture farms and replenishment of working capital" listed in the Due Diligence Report.
Second, in the voting stage of project approval, according to the company's "Working Measures for the Product Review Team of the Asset Management Division", in addition to the members of the directly related departments of the project, there shall be no less than 5 members participating in the voting on site, but the actual voting committee of the Yurun project is 4, which does not comply with the system regulations.
Third, in March 2015, when the client's asset management department applied for the second loan, the actual first investment fund was not fully in place, and the second loan was based on the 2014 financial report issued by the enterprise itself, the total liabilities of the report were far from the total amount of liabilities in the report issued by the audit firm on April 27, 2015, and the two reports were only one month apart, and Sun Mouhua knew that there were hidden risks in Group A due to the economic problems of the person in charge.
Based on the above problems, Shenwan Hongyuan believes that Sun Mouhua has problems such as inadequate management, lax review control, non-compliance with the system requirements in the number of members attending the decision-making meeting, and failure to timely remind and supervise hidden risks after the project is launched, and should bear important management responsibilities for this.
Employee claims: normal bad debt losses
It should not be linked to individual bonuses
Let's take a look at the statements and claims on the employee's side:
It is reported that Sun Mouhua joined Shenwan Hongyuan in July 2013 as the assistant general manager of the product review headquarters of the asset management division. At the time of the Yurun project, Sun Mouhua was the interim person in charge of the product review headquarters.
Due to many years of work, Sun Mouhua and Shenwan Hongyuan have signed an open-term labor contract, and the labor relationship still exists. Information from the China Securities Association shows that Sun Mouhua is still serving in Shenwan Hongyuan.
According to relevant announcement information, Sun Mouhua has worked in Shanghai International Trust, Industrial Bank Shanghai Branch and other places. Sun Mouhua, who was the deputy general manager of Shenwan Hongyuan Asset Management Division and the deputy director of the public offering investment decision-making committee, said in his introduction that he "has been engaged in risk management for a long time and has rich experience in the financial industry".
Regarding Shenwan Hongyuan's withholding of performance and advocating "management dereliction", Sun Mouhua said that he did not agree.
Sun Mouhua said that the inconsistency between the loan purpose of the project specified in the above-mentioned Yurun project review opinion and the purpose specified in the Due Diligence Report was the final result of the review, and there was no irregularity. Regarding the number of voting decision-making meeting members participating in the on-site meeting did not comply with the regulations, it was caused by the insufficient number of review members of the asset management division, which had nothing to do with him, and the resolution had been determined to be valid, and he should not be liable, and the general manager of the department did not raise any objection to this.
In addition, Sun Mouhua submitted that the rules and regulations or accountability procedures on which Shenwan Hongyuan made the penalty decision all occurred after 2015, and these provisions were not retroactive, and the Yurun project occurred before, so these rules and regulations did not apply. The company used the rules and regulations issued later to pursue the responsibility of the previous project, and did not recognize it itself.
In September 2021, Sun Mouhua applied to the Shanghai Xuhui District Labor and Personnel Dispute Arbitration Commission for arbitration, demanding that Shenwan Hongyuan pay a performance bonus of 339,200 yuan in 2020 and a payment of 285,700 yuan in the historical retention of risky projects from July 2013 to August 2021, which was supported by the arbitration award. Shenwan Hongyuan was dissatisfied with the arbitration award and filed a lawsuit in court.
Sun Mouhua said that he was indeed responsible for the evaluation and capital lending of the Yurun project, there was no violation of discipline or dereliction of duty in this process, the losses generated after the project were normal bad debt losses, and Shenwan Hongyuan should not link the company's losses with personal bonuses to deduct, and there was no institutional basis, and should be paid according to the amount of the arbitration award.
In terms of remuneration, the judgment shows that from 2013 (second half of the year) to 2017, Sun Mouhua's annual remuneration was 402,100 yuan, 2,051,400 yuan, 999,900 yuan, 2,702,700 yuan and 3,673,700 yuan respectively. After 2018, it has declined, and the salary from 2018 to 2021 is 1.9547 million yuan, 2.0835 million yuan, 1.3648 million yuan and 1.0661 million yuan respectively.
Court: Dereliction of duty in the loan approval process
Withholding performance is not improper
The two sides have different opinions, how will the court ultimately decide?
First of all, the court evaluated the evaluation process of the Yurun project: the available evidence showed that the project did not have less than 5 on-site members in the review process in accordance with the relevant regulations, and Sun attributed it to the insufficient number of review members, which had nothing to do with himself, but as the person in charge of the product review headquarters of the asset management division, he had the duty to raise objections and amendments to the flaws in the review process, and Sun Mouhua's claim had nothing to do with himself, and it was difficult for the court to agree.
In addition, the court also held that when Sun Mouhua, as a member of the review, examined the borrower's business conditions, knowing that the understanding of the borrower's operating conditions should be based on the third-party audit report and the annual routine audit report was issued only the next month, but still based on the financial statements provided by the borrowing enterprise itself, there was a problem of hasty time and insufficient basis in the evaluation of the second loan. Therefore, the court held that Shenwan Hongyuan's claim that Sun Mouhua had derelicted his duties in the approval process of the above-mentioned project loan had a factual basis and accepted it.
Regarding the basis for the punishment, during the trial, Sun Mouhua confirmed that he knew the relevant litigation situation and the final result, and the securities company claimed that the Yurun project caused a loss of 208 million yuan to the company, and provided the "Account Balance Table" for this purpose, Sun Mouhua had no objection to this, so the court found that Sun Mouhua's dereliction of duty in the review did cause greater risks to the unit.
The court found that Shenwan Hongyuan, based on the fact that Sun Mouhua was the leader of the project review team, there was negligence in the evaluation and lending process of the above-mentioned projects, and combined with the development process of the above-mentioned projects starting the review in 2015, and then suing the court until the asset restructuring of the relevant enterprises in 2020 and the loss of 200 million yuan by the securities company, Shenwan Hongyuan decided to deduct Sun Mouhua's "historical retention of risk projects" and the annual performance bonus in 2020, which complied with the rules and regulations and industry standards, and was not improper.
In the end, the court upheld Shenwan Hongyuan's application for non-payment of Sun Mouhua's two sums totaling 625,000 yuan.
Compensation in the securities industry has historically been one of the most concerned topics in the industry. Over the years, regulators have emphasized that national incentives must not be implemented, compensation income must not be directly linked to project revenue, and requirements such as deferred payment of remuneration mechanisms have been introduced.
In May last year, the China Securities Association issued the Guidelines for Securities Companies to Establish a Stable Remuneration System. It is mentioned that securities companies should closely integrate salary management with risk management, formulate incentive and constraint mechanisms that match the risk level, characteristics and duration period, ensure the effective implementation of comprehensive risk management, and achieve sound operation. Implement a veto for major compliance risk control incidents in the assessment, and strengthen the role of positive guidance and incentive and reverse punishment and restraint.
In terms of deferred payment, when formulating the remuneration system, a securities company shall establish a deferred remuneration payment mechanism for the chairman, senior management, heads of major business departments, heads of branches and core business personnel, and clarify the applicable conditions, payment standards, years and proportions. The compensation payment plan should ensure that the company is adequately capitalized and sustainable, the deferred payment period should match the risk duration of the relevant business, and the deferred payment rate should not be faster than the equal proportion.
Editor: Joey
Reviewed: Wooden fish