UBS has "witnessed a Waterloo"

After Wednesday's vote to hold 2007 executives responsible for massive losses, "UBS leadership is in a dilemma", says the NZZ newspaper Keystone

Swiss newspapers on Thursday morning were full of praise for UBS shareholders who voted to hold 2007 executives partially responsible for the bank’s near collapse.

This content was published on April 15, 2010 minutes

Commentators say the decision not to exonerate former CEO Marcel Ospel and other top managers of allowing the bank to suffer record losses and reputational damage is nothing short of historic.

“Shareholders yesterday preferred honesty over immediate profit,” the Geneva-based Le Temps newspaper said in an article titled, “Shareholder courage”.

“It was a courageous and responsible decision.”

During the big bank’s annual shareholder meeting in Basel, some 4,700 stockholders representing 1.7 billion shares, voted by a margin of 53 per cent to reject recommendations by the current board to absolve executives from all responsibility for the bank’s staggering subprime losses that prompted a SFr60 billion federal bailout.

The decision means former managers are now exposed to potential lawsuits.

“This is something that no one for a long time thought possible,” said Blick.

“By standing up to the board, the owners of UBS have written economic history.”

Shareholder democracy

The Tages-Anzeiger newspaper said the vote serves as a “slap” to top executives and represents a turning point that the bank cannot deny.

“With this ‘no’ [chairman of the board Kaspar Villiger] and UBS have witnessed a Waterloo,” the paper wrote. “Although this means little to nothing in concrete terms, symbolically it means much.”

The paper went on to say the vote is a “triumph for shareholder democracy”, and notes it was the first time shareholders of a large public company succeeded in going against the will of the executive board “not only to send a signal” but also in doing so with a majority of votes.

“Imagine: Managers selling their own shares worth SFr150 million at high market conditions through the summer…and then presenting SFr50 billion in losses. To absolve them of that, that’s too much for even the most good-natured shareholder,” the paper said.

That may be true but it was no knee-jerk reaction, countered the Neue Zürcher Zeitung.

“By agreeing with most of the board’s recommendations – such as 85 per cent agreeing that the current UBS top brass should be absolved of responsibility – the majority of shareowners are implying they do not want to hobble the bank despite their displeasure.”

What next?

“And now?” asked Le Temps.

The NZZ says the bank would be “well advised” not to go back to business as usual.

The Tages Anzeiger argues that to “really draw a line under the past”, Villiger must consider whether to prepare a case against former managers. At best, it’s a job for a “neutral judge” to decide whether "the old UBS" broke the law, it said.

“That way, [Grübel and Villiger] can take care of the new UBS uninhibited.”

Le Temps says it seems “unimaginable” that the board would stick to the status quo, after a vote akin to “the mutiny of the Bounty”.

“Yesterday’s vote will have consequences beyond the bank,” it argued, saying the era of powerful shareholder democracy has been crowned “with spectacular force”.

“But be careful,” it warned. “Shareholder democracy can’t regulate everything, in particular in the banking realm, where the central question of systemic risk remains intact.”

The paper’s cross-town rival, the Tribune de Genève, put it more bluntly. It shot down an argument that Ospel and company would never go before a civil or criminal court because such a suit would be too expensive or an exercise in futility.

“Whatever!” it said. “The penalty imposed yesterday has a symbolic significance far greater than all the judgments of the convoluted world. Swiss economic democracy has finally succeeded in overthrowing a regime. For that it is thanked.”

Tim Neville,

By the numbers

Vote to absolve 2007 executives from all responsiblity:

Yes: 767,642,136 (45.9%)
No: 882,135,647 (52.75%)

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UBS 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.

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