Ethos Foundation Challenges UBS Executive Pay and Share Buybacks

In a significant move that highlights growing tensions in Swiss corporate governance, the influential Ethos Foundation has taken a strong stance against UBS's proposed compensation and share buyback plans. The foundation, representing a crucial voice in Swiss shareholder advocacy, has recommended that shareholders reject these proposals at the upcoming Annual General Meeting scheduled for April 10. This challenge comes at a critical time for UBS, following its acquisition of Credit Suisse and amid increased scrutiny of banking sector practices.

At the heart of Ethos's criticism lies the issue of executive compensation at UBS. While CEO Sergio Ermotti's remuneration remains unchanged from 2023 to 2024, Ethos argues that it still ranks among the highest in both Switzerland and Europe. Of particular concern is the variable compensation structure, which can reach up to seven times the basic salary for executive board members. According to Ethos Director Vincent Kaufmann, such high leverage in variable remuneration could encourage excessive risk-taking, drawing parallels to the 2008 financial crisis and the recent collapse of Credit Suisse.

The foundation's opposition extends to UBS's planned share buyback program, arguing that strengthening the bank's own funds should take priority. This stance is particularly relevant given the ongoing discussions about tightening capital requirements for large banks in the aftermath of Credit Suisse's collapse. Ethos contends that the proposed share buyback and cancellation program directly contradicts these prudential considerations.

Beyond financial concerns, Ethos has identified significant gaps in UBS's approach to sustainability. The foundation points out that the bank has diluted its commitments regarding climate change, diversity, and equality. A particular point of criticism is UBS's partial disclosure of greenhouse gas emissions related to its lending activities. These developments represent a step backward in terms of environmental, social, and governance (ESG) commitments, according to Ethos.

UBS has maintained a measured response to Ethos's criticisms, referring to Chairman Colm Kelleher's statements in the 2024 annual report. The bank defends its compensation approach as performance-based, with the majority of variable remuneration deferred over several years. UBS also emphasizes its progress in integration efforts and its strengthened position as a global wealth manager. However, the challenge from Ethos could influence shareholder voting patterns at the upcoming AGM and potentially impact future corporate governance practices in Swiss banking.