Tension simmers at Nomura as Lehman bonuses loom

By Michael Flaherty

HONG KONG (Reuters) - Things are getting tense at Japanese brokerage Nomura Holdings.

As Japan's annual banker bonus season nears, there are expectations that many of the 8,000 or so Lehman staff inherited in a bold acquisition of the failed Wall Street broker late last year may walk or be axed.

Concerns over pay disparity and job security are rife and have soured the mood at Nomura, which bought Lehman's Asian, European and Middle Eastern divisions in a bid to raise its global profile and get instant access to places like China, Dubai and London.

While some legacy Lehman bankers, used to taking risks and making snap decisions, are frustrated by a traditional Japanese corporate culture of bureaucracy, hierarchy and deliberate decision making, sources at the bank say Nomura veterans resent how Lehman staffers are paid and how some replaced Nomura executives.

"The mood within the office is very bad," said one London-based Nomura employee, a sentiment shared in Asia, according to several bank staffers contacted by Reuters, none of whom wanted to be named due to the sensitivity of the matter.

One executive said frustrations in the Tokyo headquarters stem in part from a job overlap there, even though the point of the deal was to tap Lehman's reach in places like Hong Kong and London.

Nomura is not alone in weathering a brutal climate and tough bonus season, but it is in a unique situation.

Not only is it grappling with integration amid market turmoil, but to retain many of the Lehman bankers, Nomura offered a lucrative incentive plan just as the financial industry hit its worst downturn in recent memory.

The plan: a guarantee they would earn their 2007 bull market salary and bonus. That would add up in many cases to more than $3 million apiece, depending on which department they worked in, sources said.

Some guarantees were offered for 2-3 years, they added.

Recipients will get 70 percent of the annual guarantee from next week, the end of Nomura's financial year, with the rest in October. Yet sources say a flow of frustrated Lehman bankers will leave soon afterwards -- if they aren't made redundant before.

Some Lehman veterans have already headed for the exit.

Some non-Lehman staff will be paid well, too, but hope of a good bonus for the rank and file is fading fast.

While the guarantees helped keep Lehman bankers, the cost has taken its toll on Nomura -- on the bottom-line and on morale.

"The guarantees were a big concern, and still are a big concern. We'll get stock, but if we're not going to get anything else, and the Lehman guys get theirs, it's just very upsetting," said a legacy Hong Kong Nomura banker.