Three Swiss Bank Execs Forego $27 Million in Pay

As my U.S. colleagues head off for Thanksgiving, here’s a story of contrition — maybe:

From the NY Times: Remorseful Ex-Officials Decline Pay From UBS

As a number of American banks resist calls to rein in executive pay, the unthinkable is happening — at least in Switzerland, where three former officials of UBS, the troubled Swiss financial giant, said on Tuesday that they would forgo more than $27 million in compensation.

Marcel Ospel, the former chairman of the board at the Swiss bank, and Stephan Haeringer and Marco Suter, two former directors, said they would give up pay promised them after the bank reported nearly $50 billion in losses and received even more than that in financial support from the Swiss government.

“With the involvement of the Swiss government, I realized that decisive action was required on my part,” Mr. Ospel said in a statement. “I hope that my action will help to resolve a situation that was inconceivable to me until a short time ago,” he said.

I’m not sure what to make of this. Comparisons were bound to be made with U.S. executives who aren’t showing similar contrition. But is this really a true sign of regret on the part of these bankers? There is surely a behind-the-scenes story dying to be told. Not to be too much of a cynic, but I have trouble believing that these 3 gentlemen simply got together and said, effectively, “Hell, we just don’t deserve that money!” I mean, it could have happened, I guess. A clue comes towards the end of the NYT story:

In their press release, the three former UBS board members noted that their decision should not be considered an admission of guilt “in a legal sense.”

Ah, of course not.

2 comments so far

  1. Ray Grout on

    Hi Chris,I wouldn’t mind hearing your thoughts on how closely executive (or technical staff, etc.) pay should be tied to company performance in general. Although it’s certainly painful for shareholders who’ve seen their investment tank while the executives are well paid, I’m not sure if it’s any more palatable to see the same executives realize a pay rise if the company has a particularly good year. The question I struggle with is: assuming that a profit / loss is the result of market forces and the efforts of the entire company (i.e., a somewhat different situation than suggested by your original post!), who should bear the loss or realize the profit? The shareholders, or the executives? I suppose bonuses are a mechanism to assign a ‘degree of responsibility’ to employees (executives included), but evaluating a ‘degree of responsibility’ seems particularly difficult when the entire sector is in turmoil.Thanks,Ray

  2. Chris MacDonald on

    Ray:It’s not a topic I know a lot about. My understanding is that tying compensation to performance is a relatively recent trend (over the last couple of decades) that corporations have undertaken partly on the advice of academic economists & management scholars. The idea of course is to make executives <>care<> about the fate of the company by tying their income to it. Not easy to work out just the right combination of long- and short-term incentives, of course. But my understanding is that well-governed companies have pretty sophisticated methods for determining the right compensation package.Chris.

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