UBS has taken a firsts step to doing away with the concept of annual bonuses. The Swiss bank today unveiled details of a new bonus scheme, under which ‘top executives’ will receive (at the very, very most) a third of each year’s bonus at the end of the year in question. The rest will be put aside and only awarded if the bank/employee performs well and behaves nicely in subsequent years.
“Should UBS’s results be poor, a negative award, or malus, can result and the bonus account will decline. The account can also decline if regulations are grossly violated, if unnecessarily high risks are undertaken, or if individual performance targets are not met,” UBS declared in an announcement on the subject.
It also confirmed the claw-back rumours that have been circulating about recent years’ bonuses, saying that “a potential claw-back of paid bonuses for the former members of the board, as well as former top executives, is being assessed on legal grounds.’
In advance of this, a ‘task force’ has also been formed to encourage senior bankers to relinquish their recent bonuses voluntarily.
UBS investment bankers we spoke to knew nothing about the new bonus system, but they might like to find out about it soon.
Peter Thorne, an analyst who covers UBS at Helvea in London, says the new rules are unlikely to impact senior management alone: “If you are a lowly analyst or secretary you won’t be affected, but if you’re a trader taking a big risk position you probably will be.”
UBS will reveal more in a conference call later today.
The danger is that now that UBS is implementing a bonus system that only pays a third of the total each year (and claws back the remainder if things don’t go well subsequently) other banks will do the same.
That would mean that even in good years, big bonuses will be a thing of the past.