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Credit Suisse facing unprecedented pay revolt


Credit Suisse Group AG is facing growing opposition to its bonus plans for executives and directors, with a third advisory group recommending shareholders reject this year’s pay packages as excessive.

Institutional Shareholder Services Inc. is advising investors at this month’s annual meeting to vote against proposals to pay 26 million francs ($A34.4 million) in short-term bonuses and as much as 52 million francs in long-term bonuses to the bank’s executive board. It also opposes a plan to increase compensation for the board of directors to 12.5 million francs.

Tidjane Thiam, chief executive of Credit Suisse, observed last week that, as an entire sector, European banks are still ... Tidjane Thiam, chief executive of Credit Suisse, observed last week that, as an entire sector, European banks are still “not really investable”. Photo: AP

“Despite a second consecutive net loss, variable remuneration levels for the executive board remained high, including a 4.17 million-franc short-term incentive for the CEO,” the group said in an emailed report.

“The level of board compensation at Credit Suisse is among the highest for blue-chip Swiss Market Index companies.”

Tidjane Thiam, chief executive officer of Credit Suisse Group, has reorganised the bank. Tidjane Thiam, chief executive officer of Credit Suisse Group, has reorganised the bank. Photo: Jason Alden

If only half the shareholders follow the recommendations on April 28, Credit Suisse would become the first bank to have its pay packages declined under Switzerland’s so-called fat-cat laws.

The lender last year won shareholder backing despite opposition from two advisory groups. This year’s vote may be tighter.

Glass Lewis & Co. also says the proposed short-term bonuses for executives and the compensation plan for the board are inappropriate given the loss suffered by shareholders in the last two fiscal years.

Geneva-based Ethos, which advises major Swiss pension funds that may represent up to 5 per cent of the bank’s market capitalisation, is recommending voters reject all agenda items related to pay for executives and directors.

Swiss laws introduced in 2015 require companies listed in the country to give shareholders a binding annual vote on executive pay. The politician who pushed through the restrictions, Thomas Minder, has spoken out against Credit Suisse’s executive compensation plans this year and last.

Lavish packages for bankers have become controversial with taxpayers, especially since 2008 when they bailed out UBS Group AG, the country’s biggest bank. Credit Suisse increased its bonus pool for employees 6 per cent this year, defying a trend toward smaller payouts at many of its peers.

Credit Suisse’s stock fell 33 per cent in 2016, with market turmoil, surprise trading losses and legal cases sapping confidence in a costly turnaround plan. Under chief executive Tidjane Thiam, the bank has reorganised operations and scaled back investment banking to free up capital for wealth management. Credit Suisse cut some 7,200 jobs last year and plans to eliminate thousands more this year.

‘Shareholder Democracy’

“We take note of the recommendations put forward,” said Tobias Plangg, a spokesman for the Zurich-based bank. “Credit Suisse respects shareholder democracy.”

Credit Suisse is asking investors to award Thiam 11.9 million francs for his first full year on the job, including more than 4 million francs each in short-term and long-term compensation on top of a salary of 3 million francs. Ten other full-year members of the executive board are to receive total pay of 5.9 million francs on average.

Clients don’t necessarily follow the recommendations of their advisers. Glass Lewis and Ethos were also opposed to Credit Suisse’s executive and director compensation packages last year, when almost one in five shareholders voting at the annual meeting rejected the proposed packages. ISS endorsed last year’s pay proposals with reservations.

So far no major Credit Suisse shareholder has signalled opposition to the pay plans.

While Norges Bank, Norway’s wealth fund, said last week that remuneration for CEOs should be driven by long-term value and aligned with shareholder interests, it didn’t single out Credit Suisse. Another major investor, Harris Associates, has it will support the proposals.

In its annual report, Credit Suisse praised Thiam for his progress in executing strategy last year, including cutting costs and building capital, and his efforts to drive a change in culture at the bank. The CEO waived part of his bonus for 2015, when the bank took a loss mainly due to restructuring charges. Charges tied to a legal settlement over its crisis-era mortgage securities business pushed the bank into another loss in 2016.



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