Zurich-based Julius Baer has paid its managers who were involved in the Signa debacle considerably lower bonuses. This is only right. We can only hope that this sets a precedent in the industry, as finews.ch editor-in-chief Dominik Buholzer notes.
Philipp Rickenbacher was seen as the ideal appointment for the CEO position at Julius Baer. He was preceded by a reputation for caution in dealing with risks and being pleasant to work with.
The former turned out to be a miscalculation, as we now know. The adventure with Signa not only cost the Zurich private bank a lot of money – the write-off amounted to a lofty 600 million francs ($675 million) – but it has also greatly damaged the bank’s reputation as a conservative «pure play».
Several Million Francs Less
The consequences seem only logical: first, Rickenbacher lost his job in February; now he must accept a cut to his remuneration.
In the year gone by, he received a total compensation of «just» 1.72 million francs. A year ago, the bank paid him 6.03 million francs.
Chairman also Receives Less
The other managers and boards of Julius Baer involved in the collapsed Signa empire of Austrian entrepreneur René Benko also had to suffer cuts to their compensation.
Even chairman of the board Romeo Lacher will have to tighten his belt.
Another Precedent is on the Table
Julius Baer’s decision is to be welcomed. The private bank is sending out an important signal, also to its investors. For the Swiss financial center, it is to be hoped that these actions do not remain the exception.
One year ago, Credit Suisse’s (CS) history came to a crashing end. The bank failed, not least because of the mismanagement of its executives. Will these bankers be asked to pay it all back later?
National Council in Favor of Clawback
Politicians will want to have a say here. The National Council has taken a stand on this issue in recent days and advocated a «clawback» of bankers’ bonuses. It endorsed a corresponding motion by Thomas Burgherr (SVP; Aargau).
Specifically, if a major bank has to be bailed out with state funds, the top tier will have to pay back to the institution 50 percent of their total income of the previous ten years.
Political Scheming
However, federal councilor Karin Keller-Sutter, who was involved in orchestrating the rescue of CS, rejects this idea. She has a horse in this race as well: in the coming month, the Federal Council will submit its «Too big to fail» report on the CS crisis. The finance minister promises that the report will also address the responsibility of the top tier of CS.
These may ultimately be political schemes. The crucial factor remains, however, that those who fail to deliver what they promise or take too great risks, putting a company in a bad position, must accept financial penalties.
Still Not Self-Evident
This has been preached for a long time, but it is still far from self-evident – even in the financial sector, which thrives so much on the trust of its clients.