Even before Sergio Ermotti takes over as CEO Wednesday at UBS's annual general meeting, his salary is causing debate. The question is whether UBS can hand out bonuses to top management as freely as before.
In 2020, 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. Remuneration was divided between a fixed salary of 2.99 million francs and bonus components of 8.5 million, corresponding to a payout ratio of 2.8.
The entire executive board of UBS earned a total of just under 107 million francs last year, with bonuses amounting to more than three times the base salary.
Bonuses Despite 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 bleaker. Following the Credit Suisse debacle, excessive bonuses are coming under criticism, not only in the public debate and in 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 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.
