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Very scary bonus developments at UBS

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.

Comments (7)

  1. “In advance of this, a ‘task force’ has also formed to encourage senior bankers to their recent bonuses voluntarily.”
    Bankers are *ankers…they would never give money back without anything in return….even if it was a choice of Heaven or Hell, Heaven if you relinquish your bonus…what do you think an Investment Banker would pick????
    This tasks force has got one impossible task on their hands….another reason to show you that UBS has lost the plot…time to jump ship people… although there’s nowhere to go! A lot of people are going to drown…

  2. jonnybgood, through the cloud of primary school punctuation, you just about manage to make a coherent point (though not quite). that said, it’s still completely invalid and only serves to further underline your ignorance.

  3. Quite right, and make them pay their old bonuses back too. Poor performance and disgraceful behaviour, in the words of Terry Thomas ‘What an absolute shower’.

  4. Good on UBS for having the courage to be the first mover. Other banks have been scrambling to design similar arrangements so I expect they will make their announcements shortly.

    This is the right long-term decision for the business. As part of the industry trend I think it will benefit UBS since they have the advantage of a slightly more mature culture that will adapt more easily to the change.

  5. Personally,I think that the UBS Toxic Traders should be made to pay back their salries and their subsidized annual rail fares too!!

  6. Having come from this environment, I think it’s about time. These big bonuses, while great for the individual, are very damaging to the company in the long run. Yes, what is good for the individual is usally good for the collective, but not if the individuals do not remain part of that collective. For a long time I have advocated that bonuses be paid (at least a large portion of anything over 100% of base salary, to a maximum of 10x average company salary, say) in terms of company stock, which may not be sold for 100 years, with a partial refund (alotment) for announcing your retirement. Otherwise the temptation for jack-and-sell is too huge, AND, you DO want some incentive to get the top guys out, otherwise they’ll never leave their cushy plate (which some do not deserve).
    That way, the shareholders are also buying some fairly intimate knowledge of the internal workings, and a great asset for future shareholder’s meetings. It’s about time, but not nearly enough!

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