UBS will not die so that the world will speak well of it

Posted by Marc Hodak on May 27, 2009 under Executive compensation, Reporting on pay | Read the First Comment

The new head of UBS is apparently faced with the same problems that were faced by the old head of UBS.  One of the biggies is:  how do you remain competitive (and solvent) as a bank without being competitive as an employer?  Answer:  you can’t.  Another problem, then:  how do you remain competitive as an employer without upsetting the public?

As in the U.S., the Swiss bank gave up its right to pay high bonuses when it got into trouble and accepted a bailout from their government, which basically capped the bonuses.  The Swiss people, kindly and educated as they are, still suffer from the mob’s envy of the highly paid.  UBS had a choice between being competitive or making the public happy, and they chose survival.

The “exceptional” salary increases “were necessary to safeguard our profitable business areas and to secure their success,” Gruebel said. “Following significant cuts in variable compensation, we had fallen well behind the market in certain areas, and that is unsustainable in the long run.”

Hmm.  Companies being compelled to dramatically raise salaries when they were constrained from paying bonuses…who could have predicted that?

By the way, have you noticed that whenever Bloomberg (the same can be said for the WSJ) have multiple stories about a subject, they always start with the part about executive compensation?

Title reference here.