Sergio Ermotti's pay is prompting debate before takes over as CEO on Wednesday at UBS's AGM. The question is whether the bank can still hand out bonuses with any freedom.
In 2020, during his last year as UBS CEO, Sergio Ermotti's total compensation was around 13.3 million Swiss francs.
The man he is replacing, Ralph Hamers, earned a total of 12.6 million last year. His remuneration was divided between a fixed pay of 2.99 million francs and incentive-based components of 8.5 million, corresponding to a payout ratio of 2.8 (bonus/salary).
The entire executive board of UBS earned a total of just under 107 million francs last year, whereby bonuses amounted to more than three times the base salary.
State Guarantees
But after the forced takeover of Credit Suisse by UBS, the earnings prospects for the top management of the «new UBS» could look far bleaker. Following the Credit Suisse debacle, excessive bonuses are coming under renewed criticism - and not only in public debates and politics.
One question being asked over and over is whether a bank benefitting from government guarantees is allowed to pay out high bonuses at all.
Two Times Sase Salary
Shareholder representatives from the Ethos investment foundation have been arguing against excessive management compensation for years. The head of the foundation, Vincent Kaufmann, believes the time has come to reconsider a clear cap. «Especially in the new, even bigger UBS, we must prevent excessive bonuses. Because these create incentives for excessive risks,» Kaufmann told the «NZZ» (in German, behind paywall).
He suggests the European Union's salary model be applied where variable compensation is capped at twice the fixed salary. «Imposed on UBS it would mean the CEO could achieve a total top compensation of 7.5 million with the current base salary of 2.5 million francs.»
Unjustified Excessive Salary
He added that one should consider whether UBS will be able to generate significantly higher profits thanks to the Credit Suisse takeover. «Under these circumstances, the CEO could claim an even much higher salary than today, which in our view would not be justified,» Kaufmann added.
For the management of the sinking Credit Suisse, the bonus question has been answered. The Swiss Federal Department of Finance (FDF) issued an order prohibiting Credit Suisse from paying deferred bonuses to its employees for the financial years up to 2022.
