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UBS's former Chairman, Marcel Ospel, together with Stephan Haeringer and Marco Suter, two former members of the "Chairman's Office", are to return CHF 33 million (US$ 27.6 million) in remuneration.
The move follows an agreement by Peter Wuffli, UBS's former Chief Executive Officer, to waive his right to CHF 12 million. It also puts pressure on Clive Standish, the former CFO, and Hew Jenkins, the former head of the investment bank, to return a significant portion of their compensation. It is believed that Ospel will return approximately CHF 22 million with the balance made up of contributions from the other two members of the "Chairman's Office". Media reports claim that the executives were "shamed" into returning the compensation. However, UBS had been investigating legal remedies against the executives and had also set up an informal internal panel to negotiate with the executives. It is difficult to establish under Swiss law what legal remedies were available. It could be claimed that Ospel and Wuffli had mislead shareholders. In their quarterly letter to shareholders in February 2007, they stated - "..Our approach to risk has been critical to our current growth. UBS's average risk-weighted assets are today at a similar level to 1998, just after the UBS-SBC merger, although our underlying risk profile is very different. We are now a more integrated firm - our business model has evolved, and the way we view, manage and control our risks has changed. The primary focus in our risk-taking activities is to ensure the adequate diversification of risk in order to avoid illiquid and concentrated positions, and to ensure that we are rewarded for the risks we take. We have transferred resources from businesses in illiquid markets into more liquid ones, and have actively pursued risk distribution strategies. Portfolios with poor returns on risk have been cut back and the quality of other portfolios has been enhanced……. Outlook……… In the short term, as the economic cycle matures, investors might become more sensitive to any disappointing political or economic developments, so our top-class risk control remains paramount…." Later that year, after the sub-prime losses began to emerge, Marco Suter, then in his new role of CFO, explained to shareholders and analysts that the losses were incurred in a very small number of trading books which had only ever been marginally profitable. This tends to contradict what appears to be the misleading assurances given in the quarterly report to shareholders. The internal investigation submitted to the Swiss central bank also highlighted significant risk management weaknesses. Whether the return of the compensation will pacify shareholders is difficult to assess. UBS must be transparent in disclosing the overall compensation of these executives, so that shareholders can determine the satisfactoriness of the compensation clawback. Details may be available at UBS AG's extraordinary general meeting to be held 0n 27 November,2008.
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