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New York Times, November 26, 2008 article


The New York Times




November 26, 2008

Remorseful Ex-Officials Decline Pay From UBS


As a number of American banks resist calls to rein in executive pay, the unthinkable is happening — at least in Switzerland, where three former officials of UBS, the troubled Swiss financial giant, said on Tuesday that they would forgo more than $27 million in compensation.

Marcel Ospel, the former chairman of the board at the Swiss bank, and Stephan Haeringer and Marco Suter, two former directors, said they would give up pay promised them after the bank reported nearly $50 billion in losses and received even more than that in financial support from the Swiss government.

“With the involvement of the Swiss government, I realized that decisive action was required on my part,” Mr. Ospel said in a statement. “I hope that my action will help to resolve a situation that was inconceivable to me until a short time ago,” he said.

Mr. Ospel will contribute more than two-thirds of the total; the balance will be paid by Mr. Haeringer and Mr. Suter.

In response, UBS issued a very brief statement: “We welcome the decision.”

As indeed UBS might. The former UBS executives had been the focus of intense public criticism after the bank reported stunning losses on devastating subprime-related investments. This month, the bank announced that its chairman, Peter Kurer; its chief executive, Marcel Rohner; and members of its executive board would also have a bonus-free 2008.

In the United States, lawmakers and regulators have expressed profound frustration over a perceived lack of remorse among executives who made millions while peddling investments in securities whose plummeting value has pushed the financial system to the brink of collapse. Executives have resisted cuts.

Regulators in the United States have called on companies to slash bonuses this year and, in at least one case, to figure out ways to get back bonuses and severance payments already given to executives — a difficult and potentially embarrassing exercise. The former UBS executives have eliminated the need for such action, at least in their case.

“That is almost unheard of,” Dirk Jenter, an assistant professor of finance at the Stanford Graduate School of Business, said of the move by the executives. “They’ve clearly been shamed into doing that.”

But shame has been much less effective on this side of the Atlantic, where companies have resisted cutting bonuses and salaries even as their businesses crater. Only in recent weeks have companies receiving taxpayer assistance, including Goldman Sachs and Citigroup, agreed to reduce or eliminate bonus payments to current executives.

On Tuesday, under pressure from the New York attorney general, Andrew M. Cuomo, American International Group, the troubled insurance conglomerate now reliant on support from the federal government, said the company would not pay any bonuses to its top seven executives this year and that the top 60 executives would not receive any raises through 2009.

Those limits are a “positive step,” Mr. Cuomo said in a statement. “It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face.”

Perhaps of more long-term significance are changes in compensation structure now under consideration in corporate boardrooms. A.I.G., for example, also announced that its chief executive would receive no severance payments and that such payments to senior management would be limited.

Last week, UBS announced that under its new regime, as of 2009 a maximum of one-third of an annual bonus would actually be paid at year’s end, with the rest held in escrow. The amount in escrow could be reduced if UBS subsequently had poor results, if regulations were violated or unnecessary risks were taken.

In their press release, the three former UBS board members noted that their decision should not be considered an admission of guilt “in a legal sense.”

Asked whether he thought executives at Wall Street firms might follow the example of their counterparts in Switzerland, Mr. Jenter was skeptical.

“I would not put my money on it — not that I have much left after what the market has been doing,” Mr. Jenter said. “But it certainly seems unlikely.”



A version of this article appeared in print on November 26, 2008, on page B1 of the New York edition.


Copyright 2008 The New York Times Company




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