UBS defends bonuses; shareholders say no to absolving former execs for losses and tax fiasco

Shareholders vent anger at UBS meeting

GENEVA — UBS AG’s chairman defended the bank’s increased bonuses Wednesday, but shareholders vented their anger by rejecting a proposal to absolve former executives of responsibility for a U.S. tax evasion fiasco and billions of dollars in losses.

Kaspar Villiger told shareholders that UBS lost entire investment teams and their clients to rival banks in 2009 after cutting back too much on bonus payments. The higher bonuses are needed to ensure competitiveness, he stressed.

“Many of our best people are still being recruited by head hunters and competitors,” Villiger said.

Villiger also called for the passage of a proposal to absolve former top executives of responsibility for “the debacle” that saw UBS post record losses of 21 billion Swiss francs ($19.9 billion) in 2008 and require a government bailout.

But the so-called “discharge” for the bank’s 2007 board was rejected by voters representing over 52 percent of shares.

The vote leaves open the possibility of legal action against former chairmen Marcel Ospel and Peter Kurer.

Villiger had warned that litigation would likely be a waste of time and money. He said he accepted the decision, but that it wouldn’t change his position against a possible lawsuit.

Before the vote, activist shareholders lined up at the annual meeting in the northern city of Basel to criticize the bank for paying bonuses worth 3 billion francs for 2009. In the end, some 40 percent of investors opposed the board’s pay proposal in a non-binding vote after hours of often emotionally charged speeches.

Villiger said UBS remains “very concerned” about its unresolved tax evasion problems in the United States.

The U.S. and Swiss governments agreed last year for UBS to divulge the names of 4,450 American customers suspected of large-scale tax crimes. But the deal has been held up by the Swiss courts, which say it is incompatible with the Alpine republic’s strict banking secrecy laws, referring it back to the Swiss parliament for a vote in June.

The Swiss government and UBS are urging lawmakers to pass the agreement, warning that other banks with wealthy American clients may be targeted.

“UBS triggered this problem itself and we are deeply sorry,” said Villiger. “But it is now much more than UBS which is at stake.”

Villiger dismissed calls for the bank to unilaterally hand over client data to U.S. authorities, in violation of Swiss law. While some lawmakers have said laws shouldn’t be tailored to solve the problems of any one bank, Villiger said government inaction on the issue would be a “disastrous sign for the entire financial center, which would lose even more credibility.”

UBS has been trying to regain investor and client confidence and has issued repeated apologies.

At one point the board even debated changing the bank’s name, Villiger said.

UBS surprised investors earlier this week by saying it expected strong first-quarter pretax profits of at least 2.5 billion Swiss francs ($2.36 billion).

“The fact that we will continually be confronted with mistakes from the past is a reality we have to live with,” Chief Executive Oswald Gruebel said.

But, he insisted: “We are a different bank from a year ago.”

UBS shares rose 2.4 percent to close at 18.48 francs ($17.48) in Zurich.