Shareholders hold UBS ex-bosses accountable

Oswald Grübel and Kaspar Villiger address UBS's general assembly in Basel Keystone

The battered reputation of UBS has been further dented after shareholders voted not to absolve some of the bank’s former leaders of blame for its near collapse.

At the bank’s annual general meeting on Wednesday, shareholders voted against exonerating the bank’s 2007 management, which includes former chairman Marcel Ospel, from all blame.

The rebellion opens the door to possible civil or even criminal law suits.

The Swiss bank’s current leadership had urged shareholders to clear their predecessors of blame following an internal investigation that found no individual guilty of breaking laws.

The bank racked up massive losses in the subprime mortgage crash in 2008 and 2009, and became embroiled in a highly damaging tax evasion case in the United States.

Shareholders delivered their verdict at the AGM in Basel by voting against a recommendation to absolve executives and board members for the year 2007. They did, however, exonerate leaders for the years 2008 and 2009.

Ospel and Wuffli

The vote could have the greatest implications for Ospel and former chief executives Peter Wuffli and Marcel Rohner. However, the current incumbents,Kaspar Villiger and Oswald Grübel, were cleared by shareholders of blame, along with another former chairman, Peter Kurer.

Current chairman Villiger earlier urged shareholders to deal with the issue “in a sober fashion and without emotion”. He warned that seeking revenge with legal suits could be counterproductive and damage the bank.

“Experience shows that trials last a minimum of ten years, cost millions of francs, keep a company in the headlines for years, lead to paralysis within the company and in the end turn out to be much ado about nothing,” he said. “All this is not in the interest of the company or its shareholders.”

Elli Planta, president of the bank’s employee representation committee, also appealed for cool heads in spite of an understandable desire to find scapegoats. “Idiots are not necessarily criminals,” she told the meeting.

Other shareholders did not agree. Dominique Biedermann, managing director of sustainable asset management company Ethos Foundation, accused the current bank board of being “accomplices” of former bosses.

Ethos has now demanded that the UBS board bring a civil lawsuit against the 2007 executives.

Heavy criticism

Another shareholder said former bosses should not be let off – regardless of their legal liability for future civil or criminal actions. “Say no because they were part of a sick system and enriched themselves without moral boundaries while others suffered,” she said.

UBS had been heavily criticised for bringing the vote to the agenda in the first place, especially as parliament has yet to decide on the nature of its investigation into the fall of the bank.

In another contentious vote, some 55 per cent of shareholders decided to approve the bank’s 2009 compensation report, which included a significant rise in bonuses to SFr2.9 billion, mainly for key personnel. But a sizeable minority (nearly 40 per cent) rejected the remuneration system.

Speakers at the AGM reacted strongly to this subject, with some stating that continued large bonuses showed that the bank had not substantially changed its stance despite introducing long term targets and a claw back system.

Villiger said bonuses were necessary to stop an “exodus” of talent during volatile recruiting conditions. “We cut back too much last year, causing us to lose entire teams, their clients and the corresponding revenue – it was too high a price to pay.”

With shareholders streaming out of the hall after eight hours of debate, the remaining items were passed with less fuss. Villiger, along with most of the 2009 board members were re-elected for another year, and they were joined by Lufthansa Germany boss Wolfgang Mayrhuber.

A recommendation to raise up to SFr38 million in extra funds through the creation of conditional capital was also passed.

Matthew Allen in Basel, swissinfo.ch

UBS’s problems

UBS was Europe’s worst victim of the subprime crisis – writing down some $50 billion in losses – and was embroiled in a tax evasion scandal in the US.

Its problems started to become apparent in July 2007, when chief executive Peter Wuffli stepped down following the collapse of the bank’s hedge fund Dillon Read Capital Management.

Chairman Marcel Ospel stepped down in April 2008 to be replaced by chief counsel Peter Kurer – who made way for Kaspar Villiger in April 2009.

Former Credit Suisse boss Oswald Grübel was brought out of retirement to take over as chief executive at UBS in February 2009.

In October 2008, the Swiss National Bank (SNB) was forced to inject SFr6 billion ($5.29 billion) into UBS. A facility was also set up to allow the bank to bin up to $60 billion of toxic assets.

UBS was fined $780 million last year and forced to hand over the confidential details of 4,450 clients.

The bank posted a SFr20 billion loss for 2008 and a SFr2.74 billion deficit in 2009.

The bank has also suffered massive outflows of assets from its wealth management and asset management businesses.