UBS fell far short of the shareholder support it needed for its board and management's actions last year. A long-running French criminal probe is to blame.
Less than 42 percent of the Swiss bank's shareholders voted to approve UBS directors' and top executives' behavior for 2018. The «discharge» vote – usually a formality and which more than 89 percent of UBS shareholders waved through last year – exempts managers from liability for their actions.
The denial by another 41 percent of shareholders is a scathing rebuke for Chairman Axel Weber and CEO Sergio Ermotti. The two were foiled by influential U.S. adviser Institutional Shareholder Services (ISS), which told shareholders to oppose the vote because of a prolonged criminal trial in France.
Symbolic Slap
Earlier on Thursday, Weber signaled he didn't expect to clinch the majority needed, as finews.asia reported. Legally, the rejection doesn't immediately trigger anything: ISS issued no demands with its recommendation, which it termed purely pre-emptive.
Nevertheless, it is hugely symbolic, both for UBS' overseers and executive as well as for directors and top executives at other publicly listed companies in Switzerland (like GAM, where shareholders are also opposing the backing). Seven years into their tenure running the bank together, the rebuke is the last thing the 62-year-old Weber and Ermotti, who turns 59 next week, need. Besides sorting the French investigation, the two need to sort out their staggered succession, Weber said earlier on Thursday.
«Best Interests»
«In our view, the trial in France did not show in any way that UBS failed to comply with the regulations that applied at the time in France and Switzerland…it was not possible to reach an acceptable out-of-court settlement in the France case. That's why we decided to defend the bank in court. We believe this was in the best interests of shareholders...We will not waver from the chosen path,» Weber said in response to this «discharge» vote.
Crisis-Era Comparisons
Ermotti and chief lawyer Markus Diethelm are the architects of a pugnacious legal strategy in France. UBS recently learned it will spend the next two years at least in an appeals process to a $5 billion fine in the criminal trial – a decision Ermotti shredded.
The last time shareholders denied UBS approval was for the 2007 financial year, when the bank posted a 4.4-billion Swiss franc ($4.3 billion) loss. UBS came perilously close again in 2011, winning only just 52.8 percent backing. Then, $1.8 billion in losses by rogue trader Kweku Adoboli marred UBS' year (it still closed with an annual profit of 4.2 billion francs and distributed a paltry 0.10 francs per share).
