UBS chairman Axel Weber defended the Swiss bank's pay policies to shareholders on Thursday. He also took a swipe at crosstown rival Credit Suisse. 

UBS chairman Axel Weber waded into the controversy in Switzerland over executive pay at the Zurich-based bank's shareholder meeting in Basel.

His prepared remarks at UBS' annual general meeting were preemptive: Weber earned 6.07 million Swiss francs, and Chief Executive Sergio Ermotti took home 13.7 million francs – making them the two highest-earning Swiss executives.

Unlike Credit Suisse, UBS escaped the pay brouhaha relatively unscathed: only shareholder activist Actares opposed its pay report as too high in relation to profits.

Carping at Credit Suisse

Weber didn't directly address the criticism in his prepared remarks, but noted that the overall bonus pool for UBS staff was lowered by 17 percent on the year. Ermotti's salary was only slightly lower, while Weber's pay actually rose.

The overall bonus pool however was reduced as the Swiss bank's profits fell, Weber explained: «Our compensation system works and responds to the development of our business.»

The remark is a not-so-thinly veiled swipe at Credit Suisse, which outraged shareholders and proxy groups alike with an executive pay hike amid a tumble in its shares, a second consecutive net loss, and a cash call.

Performance for Bonuses

Credit Suisse had already backed down on bonuses as the opposition formed, so a feeble 58 percent approval from shareholders for its pay policies was all the more painful.

At UBS, a consultative vote on pay passed with the approval of more than 88 percent of shareholders.  The massive difference in results garnered by Weber and by Credit Suisse chairman Urs Rohner underscore the reality that shareholders don't mind big pay packages at all – but they want performance and their share of profits, as finews.com has written.

Little Risk of Snub

Weber wasn't at risk of a pay snub like Rohner because major U.S. proxy groups Institutional Shareholder Services and Glass Lewis has supported UBS' bonus policies. He nevertheless devoted considerable attention to the topic, commenting that he could understand the furor it had unleashed in Switzerland.

«It's important for us to reward performance and finding a balance between our employees and yourselves as shareholders,» Weber said.

High Payout Ratio

He deftly referred to UBS' planned 0.60 franc-per-share dividend following the pay remarks, which translates to a 71 percent payout ratio. It is the third year in a row that UBS has held to its 2012 promise to out at least half its profits to shareholders.

Credit Suisse, perilously low on capital and behind European rivals in paring back bulky investment banking activities, has only very recently vowed to lift payouts, in cash, to its shareholders.

Weber was rewarded for his efforts with reelection by more than 97 percent of UBS shareholders, compared to 90 percent for Rohner at Credit Suisse.