The finance industry never tires of complaining about dwindling respect and trust in bankers. Prominent examples in Switzerland underscore the blatant lack of self-awareness over the reasons why. A finews.com commentary.

Ten years after the financial crisis unfolded, the banking landscape is very different. Far tougher rules on capital and risk-taking with a view to stabilizing the financial system has put a stop to what investment banker John Mack memorably referred to as the «casino» mentality of old.

Today, many CEOs freely admit that greed and pay got out of hand before the financial crisis. Governments including the Swiss spent billions to rescue banks, averting an even larger economic disaster. Since then, banks have reduced their risk-taking, adjusted their business models, tightened internal rules – and polished their images.

Fundamentally, everything has changed in ten years. Or has it? The thinking of banking CEOs and chairmen is still quixotic – executives still don’t recognize one of the industry’s greatest ills.

Greedy Executives

Banking leaders still help themselves to pay as if the the financial crisis and the corrosion of trust in banks had never happened, or what Beat Wittmann has called the «epic destruction of shareholder value», not to mention far more modest post-crisis revenues.

Credit Suisse is once again the flag-bearer for greedy executives: top management under CEO Tidjane Thiam was granted a 28 percent rise in salaries and bonuses on the year to 82.04 million Swiss francs. The board under ineffectual chairman Urs Rohner took home 11 percent more.

CEO Thiam and Chairman Rohner took home 30 percent and 25 percent more, respectively, according to the bank’s elaborately explained 35-page compensation report.

Reckless Mentality

That is set against another ruinous year for Credit Suisse employees and shareholders. The bank let go thousands of staff, salaries and bonuses suffered double-digit cuts. The bank is in precarious territory on the key issue of capital after yet another billion-franc annual loss.

Thiam’s strategy to shore up revenue hasn’t proven itself yet either. Contrary to his assertions of only a few months ago, Credit Suisse will inevitably have to ask shareholders for more capital.

The grab-and-go pay mentality shows an recklessness with shareholder money that a more entrepreneurially inclined firm would never afford itself. As the firm, employees, and shareholders bear the brunt of Credit Suisse’s crisis, management is busy inventing schemes to ensure their pay remains high no matter what happens.

Pseudo-Eshewing

The protagonists show just how far removed and ignorant of reality they are with comparison to the competition (pay at UBS was higher at both CEO and chairman level), blaming legacy issues or pointing to bogus eschewals of pay.

It is extremely tough to justify Credit Suisse chairman Urs Rohner’s pay: the Swiss lawyer guided the bank’s legal fate as Chief Counsel from 2004. After losing out to Brady Dougan for the top job in 2008, he joined the board in 2009 as vice-chairman – reportedly because the regulator wouldn’t approve him for the chairman role immediately. He took the top spot in 2011: shareholders can hold him to account for strategy failings and legacy issues in the last six years.

Rohner is blissfully unaware of any failings, attempting to peddle a pay raise last year as a voluntary relinquishing of pay – he was entitled to 750,000 francs more.

At the Feeding Trough

To be sure, Rohner isn’t alone at the feeding trough. Pierin Vincenz, chairman of embattled derivatives boutique Leonteq, claimed to have forgone one-third of his 750,000 franc compensation – conveniently ignoring the fact that he had previously pushed through am eye-watering 130 percent pay rise for himself.

GAM’s hapless CEO, Alex Friedman, allowed his board to give him a 20 percent pay rise to 6.1 million francs, a figure completely removed from what the asset manager has achieved under his leadership – not to mention the company’s size and importance. Boris Collardi at Julius Baer – 6.5 million francs – is another prominent example of compensation completely out of relation to his firm’s size.

The mechanics behind these salary measures are well-established and follow a common pattern in the global financial industry: salaries are «benchmarked» against real and perceived competition, but performance criteria merely influence pay within a narrow band.

Reliably Bunglers

Secondly, in this world view, a board which takes lavish care of its top management need have little compunction about granting themselves millions in pay schemes as well.

Rohner is an example of this, as is UBS chairman Axel Weber, who earned more than 6 million last year, or outgoing GAM chairman Johannes de Gier and Daniel Sauter of Julius Baer, both of whom earned more than 1 million francs last year as non-executive chairmen.

These practices underscore an industry which remains clueless, irresponsible, unaware and often removed from its own corporate reality – these same top bankers never tire of complaining about how trust in the financial industry seems to have dissipated.

At the same time, they have it in their hands – but year for year, they reliably bungle the opportunity to send a signal of relative modesty to win back trust.