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Sergio Ermotti’s remuneration is making headlines – also because UBS actually has a government guarantee, says Professor Kunz.
UBS boss Sergio Ermotti received 14.4 million francs in compensation for nine months of work – the equivalent of 80,000 francs per day. “For me as a citizen, this number is hardly comprehensible,” says Peter V. Kunz. The professor of business law at the University of Bern has been dealing with stock corporation law for a long time – and thus also with bonuses for top managers.
It is a very generous compensation for Mr. Ermotti.
On the other hand, UBS and Ermotti operate in the free market economy, says Kunz: “Wages and bonus payments are an agreement between the bank and employees.” If the bank is willing to pay this amount, it would only be a problem if UBS has to be rescued by the state in a few years. “Then perhaps their risk-taking behavior was wrong.”
Legend: UBS boss Sergio Ermotti has a good laugh: 14.4 million francs in compensation for nine months. Keystone/Michael Buholzer
High wages even by international standards
One thing is clear: for Ermotti, returning to UBS was definitely worth it. “It is a very generous compensation for Mr. Ermotti,” emphasizes the banking professor. This is even the case in comparison with large foreign banks – for example if you compare Ermotti’s salary with that of the heads of Deutsche Bank or large French banks.
Fixed salary plus bonus for Ermotti
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Caption: Keystone/Rolex dela Pena
Ermotti’s compensation consists of a fixed salary of 2.1 million francs and variable remuneration, the bonus, in the amount of 12.3 million francs. This bonus consists mainly of shares that will be paid out staggered over the next five years. If the share price increases during this period, the value of the shares allocated to Ermotti also increases again.
Ermotti could end up receiving even more than the 14.4 million francs announced today for 2023. The idea behind the staggered payout system: The UBS boss should work to ensure that the bank continues to do business successfully in the next few years – and not just in the short term.
Given this high amount for Ermotti, the question arises as to whether the work of a single person can be worth that much. After all, it is not only thanks to him that UBS got through the takeover year so well.
Around 110,000 employees have been working every day since the merger with CS. “The front-line employees at the bank counter are also responsible for the success,” emphasizes Kunz. But only the bank’s managers would receive the big bonuses.
Managers profit excessively from good things – and when things go badly, they are hardly ever punished.
What’s more, if things go wrong with the bank, these managers are hardly ever prosecuted. “The managers benefit excessively from good things – and when things go badly, they are hardly ever punished,” says the banking professor.
Nevertheless: The company decides for itself which wages it pays to whom. The shareholders determine in detail how high the total amount of compensation will be, and the company’s board of directors determines the allocations to the individual managers. From a legal perspective, these are purely private decisions made by the bank.
Criticism from politics from the FDP
Politically, however, things look different: Shortly after Ermotti’s compensation became known, FDP President Thierry Burkart criticized the high sum on Platform X. Such bonus excesses would destroy the population’s trust in the economy, he wrote.
And further: The population actually bears the business risk, since UBS is considered systemically important and therefore has a quasi-indirect government guarantee.
Contain UBS’s risks?
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There is discussion in politics as to whether UBS, with its de facto state guarantee, should be supervised more strictly – for example by the Financial Market Supervisory Authority and/or the Swiss National Bank.
Finma itself would like to gain more skills and have a greater say in the remuneration systems of systemically important banks. The point is that Finma could intervene with legal support if the bank were to set false incentives for the bonuses.
Another idea is that the managers would be liable with their bonuses if things go wrong with the bank later. “There was no legal basis for this at CS, but we could change that now for the future,” says banking professor Peter V. Kunz.
“As a politician, Burkart definitely has a point here,” says banking professor Kunz. By rescuing Credit Suisse, Switzerland took a risk of 260 billion francs. That’s why UBS is currently “actually not in a situation in which everything is purely private-sector.” In fact, UBS has a state guarantee. That’s why the state should have “a certain say,” said Kunz.