Ethos commends the decision of UBS' Board to submit its new remuneration system to the vote of the shareowners at the Annual General Meeting of 15 April 2009. However, the new structure of remuneration does not cap variable remuneration in terms of base salary.
This could lead the Bank to pay particularly high amounts of remuneration including a substantial variable part. Ethos therefore recommends that shareholders oppose the new remuneration system.
In parallel, ABB has accepted to put its remuneration report to the advisory vote of the shareowners at its Annual General Meeting to be held on 5 May 2009. This decision follows the submission by Ethos and eight Swiss pension funds of a Say on Pay resolution on the agenda of the next annual general meeting.
The variable part of UBS' executive remuneration consists of a bonus-malus system as well as a share based incentive plan. The bonus-malus system is particularly interesting, as the bonus is calculated over several years and can be reduced by a malus in case of underperformance. However, neither the bonus nor the incentive plan is capped in terms of base salary.
The absence of a cap might allow, as seen in the past, to award certain executives variable remuneration that could reach up to 80% or 90% of total remuneration. Both the shareowners and the regulatory authorities have recently put into question remuneration systems allowing for particularly high variable parts that can potentially create the wrong incentives and lead to excessive risk-taking. This is why Ethos' voting guidelines stipulate that the variable part of remuneration should in principle not exceed 50% of total remuneration.
Ethos considers that the UBS proposals will not limit potentially excessive remuneration and recommends that shareholders refuse the new system of remuneration at the annual general meeting to be held on 15 April 2009.
Following the submission of a resolution by Ethos and eight pension funds, ABB accepted to give shareowners the right to cast a separate advisory vote on the remuneration report at the annual general meeting of 5 May 2009. Ethos and the eight pension funds therefore accepted to withdraw their resolution. The Board of directors of ABB joins Credit Suisse Group, Nestlé and UBS that made a similar decision several weeks ago.
Ethos will now proceed to a detailed analysis of the abovementioned companies' remuneration reports and will disclose, in due time, its voting recommendations regarding the remuneration reports of Nestlé (AGM on 23 April 2009), Credit Suisse Group (AGM on 24 April 2009) and ABB (AGM on 5 May 2009).
