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UBS shareholders urged to reject executive pay proposal

UBS investors should reject the the firm’s compensation report, shareholder adviser Glass Lewis says, citing high fines in a legal dispute and the generally lackluster performance of the bank’s shares.

UBS had proposed a pay package that included 14.1 million francs ($14 million) in compensation for CEO Sergio Ermotti for last year. While that’s down slightly from the 14.2 million francs he received in 2017, executive pay at UBS appears consistently above peers, Glass Lewis says in an emailed report.

“On balance, we do not believe shareholders have been presented with sufficient evidence of a link between pay and performance,” Glass Lewis wrote. “Shareholders could have reasonably expected the board to use its discretion to adjust variable compensation to reflect the shareholder experience.”

Ermotti has come under pressure as shares of the lender declined 32% last year and the bank was ordered to pay a record $5 billion in a French tax scandal. Last month, the CEO stunned investors by saying that conditions in the first quarter were the toughest in years, forcing the bank to slow hiring and deepen cost cuts.

Employees pass between offices as the UBS logo sits on a walkway at the bank's headquarters in Zurich, Switzerland, on Monday, Jan. 22, 2018.
Employees pass between offices as UBS Group AG logo sits on a walkway at the UBS headquarters in Zurich, Switzerland, on Monday, Jan. 22, 2018. A UBS loan backed by shares of Steinhoff International Holdings NV was to blame for the majority of the Swiss bank’s 79 million francs ($82 million) in credit losses in the fourth quarter, a person with knowledge of the matter said. Photographer: Stefan Wermuth/Bloomberg

Glass Lewis also criticized compensation at crosstown rival Credit Suisse Group AG, telling investors earlier that they should reject that bank’s compensation report as well. A pay increase by 30% for CEO Tidjane Thiam was “unjustified” even after he delivered Credit Suisse’s first annual profit in four years. At 12.7 million francs, Thiam would still be making less than Ermotti.

Ermotti’s compensation exceeds pay given to CEOs at peers, the shareholder adviser says, adding that his base salary is 67% higher than the average at European banks. It criticized UBS for benchmarking executive-pay levels against large U.S. financial companies, arguing that most of those firms have a significantly greater market capitalization.

Still, Glass Lewis acknowledged that both operating and net profit increased in the past fiscal year, as did the proposed dividend to shareholders.

UBS says that the bank’s overall bonus pool for 2018 was down as was compensation for the Group Executive Board and the CEO, while returns to shareholders rose.

“We believe a clear link between pay and performance has been presented in our compensation report,” the spokesman says in an emailed statement.

The shareholder adviser recommended voting for executive compensation, saying that it was “overall supportable” despite the concerns raised about the company’s performance and the rejection of the compensation report, which details how pay is structured as well as the bank’s policies and procedures.