UBS Slashes Its Bonus Pool for 2008 by More Than 80%

UBS Slashes Its Bonus Pool for 2008 by More Than 80%

Jan. 28 (Bloomberg) -- UBS AG, the European bank with the highest losses from the credit crisis, cut its bonus pool for 2008 by more than 80 percent.

Variable compensation for the bank’s employees excluding brokers in the U.S. is being reduced, Andreas Kern, a spokesman for Zurich-based UBS, said in an interview today. The pool will be less than 2 billion Swiss francs ($1.75 billion), based on the 9.5 billion francs UBS has said previously it paid out for 2007.

UBS reduced bonuses after it was forced to accept a $59.2 billion government aid package in October, mirroring the U.S.’s capital injections for the biggest American banks. Now that governments have a stake in the industry, employees will be paid less and firms will have to prove they are rewarding talent based on performance, according to Jeanne Branthover, managing director in charge of global financial services for Boyden Global in New York, an executive search company.

“You won’t see compensation packages anywhere near what they were,” Branthover said. “The firms can’t explain it, the profits won’t allow it and shareholders won’t stand for it.”

Cash bonuses paid to New York City employees of Wall Street firms declined 44 percent last year amid record losses in the securities industry, state Comptroller Thomas DiNapoli reported today. Financial firms disbursed $18.4 billion, compared with $32.9 billion in 2007, DiNapoli’s office calculated, basing its estimate mainly on personal income-tax collections.

Pay Backlash

The aid plan for UBS prompted a backlash against executive pay in Switzerland. The Swiss Social Democratic Party’s youth organization and the nation’s biggest trade union staged protests at UBS branches, demanding repayment of all bonuses for the past five years and a cap of 500,000 francs on all remuneration.

Chief Executive Officer Marcel Rohner, his 11 colleagues on the executive board and Chairman Peter Kurer won’t get any variable pay for 2008. The bank is also revamping its compensation model to allow it to take back parts of pay from some employees in the years after the award.

The bank, which had more than 7,900 brokers in the U.S. as of the third quarter, is under contractual obligation to pay about 1.3 billion francs in variable compensation, Oswald Sigg, a spokesman for the Swiss government, told a press conference in Bern. UBS bonuses were one of the matters discussed by the Swiss government at a Cabinet meeting today, Sigg said. Kern declined to comment on the figure, saying exact numbers will be published on Feb. 10.

New York Attorney General Andrew Cuomo said yesterday that he subpoenaed former Merrill Lynch & Co. CEO John Thain for more information about bonuses Merrill paid just before its acquisition by Bank of America Corp. earlier this month. Thain said Jan. 26 that he’d kept the Charlotte, North Carolina-based bank informed about the brokerage’s finances and compensation.

The U.S. Treasury this month agreed to provide $20 billion in capital and $118 billion in asset guarantees to Bank of America to help it absorb losses at New York-based Merrill.

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