UBS Gets Stinging Rebuke From Shareholders on Pay

UBS joined the lineup of major banks under attack from shareholders for handing out lavish pay packages, in an echo of recent protests at Credit Suisse and Barclays.

Against a backdrop of sub-par 2011 profit and a $2 billion rogue trading scandal, more than one third of the Swiss bank's shareholders rejected its pay plans, including those for incoming chairman and former Bundesbank head Axel Weber and Andrea Orcel, who will co-run the investment bank from July 1.

Shareholders also only narrowly approved management's overall performance last year, reflecting anger over the trading scandal.

Last week, nearly one third of Credit Suisse and Barclays investors opposed pay deals for top executives.

Public anger at risk-taking and multi-billion dollar bank pay deals blamed for global economic woes is now finding a voice among an increasing number of investor organisations.

Swiss shareholder groups Ethos and Actares had urged shareholders to vote down what they see as excessive pay packages at UBS.

A rebellion by a large group is a relative novelty in Switzerland where vocal criticism of companies more commonly comes from small retail shareholders.

Evidence of a recovery at UBS's flagship private bank and a 4 percent rise in the stock price on Wednesday may have staved off some shareholder anger.

But UBS chairman Kaspar Villiger was forced to defend Weber's 4 million Swiss franc ($4.4 million) signing-on fee, saying it was meant to reward the former central banker's wish to make a long-term commitment to the Swiss bank.

Villiger told shareholders UBS paid Orcel an undisclosed sum for relinquishing awards from former employer Bank of America Merrill Lynch, but he would not be paid a guarantee or welcome bonus.

"Yes, he earns a lot but he must also deliver," Villiger said in response to a question from retail shareholder Brigitta Moser-Harder, who owns nearly 600 UBS shares worth around 7,000 Swiss francs ($7,700).

Orcel, U.S. brokerage head Robert McCann, Weber and Chief Executive Sergio Ermotti were the top executives most often criticised by many of 3,400 shareholders present.

"Big banker pay hasn't been tamed at all. It's as though UBS hasn't learned any lessons at all from the past crises," Moser-Harder said.

Villiger defended McCann and Ermotti, saying the U.S. head had turned a "problem child" into a profitable unit. With 9.2 million Swiss francs, McCann is UBS's top earner. The details of Orcel's pay package with UBS have not been made public.

SENDING A SIGNAL

Ethos, influential because it makes recommendations for Swiss pension funds, is particularly incensed over Weber's deal.

Weber, who was given a 98.8 percent endorsement by shareholders to join the board, is taking over as chairman ahead of schedule as Villiger steps down a year earlier than planned following the rogue trading scandal.

UBS, which ended 2011 with roughly 200 more employees on the year, cut its bonus pool by 40 percent to 2.57 billion Swiss francs. Investment banking chief Carsten Kengeter agreed to forgo his 2011 bonus after the $2 billion trading scandal. As a result, UBS does not have to reveal Kengeter's pay.

UBS CEO Ermotti earned 6.4 million Swiss francs last year, which compares with Credit Suisse boss Brady Dougan, who saw his pay more than halved to 5.8 million francs amid a 41 percent tumble in the bank's stock.

UBS shareholders only backed a so-called discharge of management for their 2011 performance with a thin majority of 52.84 percent, reflecting anger over the unauthorised trading losses.

The discharge means the firm and shareholders who voted for it lose the option of taking legal action against those who were in charge for that particular business year.

($1 = 0.9086 Swiss francs) (Editing by David Cowell)