Sergio Ermotti is wrestling with his decision of when to leave the top job at UBS. His handling of a key potential successor in 2018 raises questions over how big a role the CEO holds in the overall planning.
UBS Chairman Axel Weber was at the center of a messy public debate over succession at the Swiss wealth manager last year, as finews.asia reported. The German ex-central banker took the heat – but a key player in the botched episode was none other than Sergio Ermotti, finews.asia has learned.
The long-standing UBS CEO blindsided Weber with last-minute news that Andrea Orcel, its top investment banker, was leaving, according to three sources familiar with the matter. Ermotti kept the explosive news to himself for more than ten days before informing Weber, in Singapore, ahead of a regular board meeting, the people said.
The lag between Ermotti learning of the high-profile departure in the first week of September and passing it on to the board in the week of September 17 proved hugely meaningful. Directors including Anne Godbehere, who has since left UBS, David Sidwell, and Robert Scully were upset: by the time the board learned Orcel had an offer from Santander, it felt hamstrung to do anything, the people said.
Anger in Jam-Packed Agenda
By that time Santander was just one week away from publicly naming Orcel as its new CEO. Several directors privately voiced their anger over the late notice amid an already-packed board agenda, the people said. The reason? Orcel had apparently figured prominently in internal succession plans, they said.
This counters what Ermotti had conveyed to Orcel over the years: that the Italian dealmaker didn’t have a chance at the top spot. The considerable effort UBS put into trying and keep him, as finews.asia reported previously, worked to disprove this.
Ermotti, who had lost another potential internal successor, Juerg Zeltner, nine months before Orcel left, emerges as a central figure in UBS’ crafting of a succession plan. The long-standing CEO, who has told colleagues he would like to close out one decade running the Swiss wealth manager, has regularly boasted of the deep bench UBS has to replace him.
CEO Wrestled Issue
Instead, Ermotti seems to have wrestled the issue from the board’s nomination committee – simply by tightly controlling or even sitting on the information of Orcel’s planned departure. A spokesman for UBS denied Ermotti overreached. «The initial conversations at the time were preliminary, private and explicitly requested to remain confidential,» UBS said.
«Later, when it became clear that a resignation was very likely but not definitive, the chairman and consequently the board were promptly informed, at least a week before the official resignation was announced,» UBS said. «Anyone indicating that the board had not enough time to respond, is intentionally misleading or ill-informed.»
Facing Investors
The episode nevertheless reveals diverging interests between the CEO and UBS' board. When Orcel and Ermotti first spoke about the Santander offer, UBS’ first investor day in four years was just seven weeks out.
If Orcel was going to leave, Ermotti presumably wanted the news out well ahead of the event, which was central to investors’ view of the bank’s stock. Santander and UBS both released statements on September 25, 2018 – a full month before the Swiss bank’s event.
Frosty After Singapore
The board was primarily concerned about what Orcel's exit meant for UBS' succession planning – and scrambled to try and hold onto him. The outcome is well-known: Orcel opted for Santander, but never made it to Madrid, and is now suing the bank for reparations. A Madrid court is poised to hear arguments in April.
Back at UBS, the kerfuffle in Singapore led to a perceptible chill between Weber and Ermotti. The debate over succession eventually abated, especially after UBS hired Iqbal Khan last autumn. At 43, Khan is young enough to credibly reinforce UBS’ succession plans. The questions over Ermotti’s role in the bank’s succession planning remains.
