Top banker enters “business ethics” fray

Wuffli wants to unchain the corporation... Keystone

The head of Switzerland’s largest bank has outlined his vision of how companies can regain public trust, in the context of a growing debate about "business ethics".

Peter Wuffli, group CEO of banking giant UBS, condemned what he called the “almost cyclical abuse of power by business leaders” that led to a series of high-profile corporate collapses in recent years.

However, he told the 35th annual ISC conference at St Gallen University that society now ran the risk of “going too far” and “crushing” business with arbitrary new regulations.

Wuffli said the time had come to “give corporations the chance to earn back the trust of society”, and argued that businesses – like individual human beings – “need freedom”.

The UBS boss was a keynote speaker at the three-day conference, which opened on Thursday and addresses the overall theme of “Liberty, Trust and Responsibility”.

Other opening-day speakers included Swiss cabinet minister Moritz Leuenberger, NATO secretary-general Jaap de Hoop Scheffer and Japanese deputy finance minister Hiroshi Watanabi.

Since its foundation, the ISC (International Students Committee) has focused on promoting international dialogue around the theme of a “liberal and social order” for business and society.

Valuing value

The conference comes against the background of a series of international corporate scandals, as well as growing concern in Switzerland about issues related to business ethics – in particular, corporate governance and executive pay.

There is also a strident public debate in neighbouring Germany about the nature of the capitalist system, sparked in part by the public comments and actions of Josef Ackermann, the controversial boss of leading bank, Deutsche Bank.

Ackermann, who also chairs the ISC organising committee, was the butt of several comments by Social Democrat and federal cabinet minister Moritz Leuenberger, who opened the conference with a speech about values in business and generally.

UBS boss Wuffli reflected on the meaning of “corporate trust” in a world increasingly dominated by large corporations such as UBS, whose major priority is to maximise profit for their shareholders.

He illustrated the underlying problem by saying he had recently received a “very sincere” three-page letter from an engineering student, asking why a large part of UBS’s record 2004 net profits could not be devoted to social programmes.

Wuffli replied that a decision to use some SFr3 billion ($2.44 billion) of the SFr8 billion total profit this way would be viewed by shareholders as incompatible with its mandate.

Profit incentive

“The market’s response would be quite immediate – the value of UBS, currently at around SFr100 billion would drop immediately to half or less. It is a practical certainty that one of two things would happen next.”

Either someone would bid for the company and establish new leadership focused on maximising profit, or UBS would decline in competitiveness and attractiveness, leading to an exodus of qualified staff, clients and “the beginning of the end”.

“For a large, global listed corporation, there is simply no alternative to maximising the profit potential relative to relevant competitors.”

However, he said this did not mean only “cold-blooded short-term profit maximisers [would be] rewarded by the financial markets”.

He said companies could only be successful if they “balanced the interests of various stakeholder groups” – particularly customers and employees.

“Responsible corporate leadership means delivering on a profit-oriented mandate in a way that is fully transparent and in line with its stated values, vision and strategies,” he said.

However, he concluded: “It is only individuals who can act responsibly. A company is as ethical as its people – every single one of them.”

swissinfo, Chris Lewis in St Gallen

Key facts

The ISC Symposium has been held at St Gallen University every year since its inception, one year after the 1968 student riots.
The student organising committee regularly succeeds in attracting top names from the worlds of business, politics and science.
St Gallen University hosts Switzerland’s largest faculty for economics and business studies.

In brief

Wuffli says there has been an erosion of public trust in business – particularly in the wake of high-profile corporate scandals.

However, over-regulation is not the answer, and companies should be given the chance to restore trust themselves.

They must find a balance between the rights of shareholders and those of other “stakeholders”.