Swiss weekly Sonntag reports that UBS will freeze bonus payments for three years and allow shareholders to approve manager pay packages. An official announcement from UBS on the terms of their revised compensation structure is expected Monday, with a full briefing for shareholders to follow on November 27.
Since summer 2007 when they shut down two hedge funds, an event that helped kick the credit crunch into high gear, UBS has sustained about $40b in losses due mostly to bets on subprime securities. The compensation restructuring is the first large-firm move to bring more accountability for risk-taking and more directly tie executive decisions directly to long-term results. More below.
The move follows strong criticism of the bank by politicians, unions and the Swiss media after it was revealed that senior officials had been paid bonuses worth millions of francs annually while presiding over an investment strategy that eventually forced UBS to seek a $60 billion government bailout last month.
Earlier this month, former CEO Peter Wuffli said he would return a 12 million franc ($10 million) “golden parachute” he received after leaving UBS last year.
Other former top managers, including former chairman Marcel Ospel, have been urged to give back bonuses and other payments credited to them at a time when the bank was investing heavily in the U.S. subprime mortgage market, which collapsed in July 2007.
Meanwhile, the bank has also said that no bonuses will be paid to CEO Marcel Rohner and the 12 current board members, and UBS chairman Peter Kurer said he would forgo any bonus for 2007 and 2008 until the bank has recovered from its huge losses.
UBS will hold a special meeting Nov. 27 to inform shareholders about the changes to its compensation system and allow them to vote on measures related to the government bailout, which has allowed the bank to dispose of most of its so-called “toxic assets” and draw a line under a disastrous year for one of Europe’s biggest financial institutions.