UBS paid McCann $9.9M after wealth turnaround

UBS AG, Switzerland’s biggest lender, said Robert J. McCann, the head of wealth management Americas, was the highest-paid member of the executive board in 2011, receiving total compensation of 9.18 million Swiss francs ($9.9 million).

About 76 percent of the 7.79 million-franc bonus awarded to McCann was deferred into future years, UBS said. The wealth management Americas division posted a pretax profit of 534 million francs in 2011 after a loss of 130 million francs in the previous year.

Sergio Ermotti, who took over as chief executive officer after Oswald Gruebel resigned in September, received 6.35 million francs, including 1.39 million francs in base salary, Zurich-based UBS said in its 2011 annual report, published today. Carsten Kengeter, the head of the investment bank, was the highest-paid member of the board in 2010 with 9.32 million francs, including a base salary of 874,626 francs.

Kengeter waived any variable pay entitlements he may have had after UBS in September discovered a $2.3 billion loss from unauthorized trading, Ermotti told reporters last month. UBS also has said that the bonus pool for the investment bank was down about 60 percent from 2010 and that some of the bonuses awarded in previous years would be clawed back. The bonus pool for the entire bank was cut 40 percent as net income dropped 45 percent.

This year will be “a year of transition for the investment bank as we continue the progress of reducing risk-weighted assets and reshaping the business to ensure its future success,” Ermotti and Chairman Kaspar Villiger said in a letter to shareholders. “We are confident we will be able to provide more attractive and sustainable returns to our shareholders.”

Total compensation figures include base salary, bonuses including deferred pay, benefits in kind and contributions to retirement plans.

CEO Bonus

UBS declined 28 percent in Zurich trading last year, compared with a 42 percent drop in Credit Suisse Group AG, Switzerland’s second-largest bank.

Ermotti, who first joined UBS on April 1 as the head of business in Europe, Middle East and Africa, was granted a bonus of 4.6 million francs, with 88 percent deferred into future years, the bank said. Gruebel, who returned UBS to profitability after the bank posted the biggest loss in Swiss corporate history in 2008, waived any bonus entitlement for each of the three years he was in office.

Bonus Clawbacks

“As group CEO, Mr. Ermotti has been quick to grasp the leadership challenges presented, including finalizing and presenting the group strategy on investor day and re- establishing investor and regulatory confidence in the wake of the unauthorized trading incident,” UBS said today, explaining his bonus award.

As a result of the trading loss, 50 percent of the first installment vesting this year under the Senior Executive Equity Ownership Plan awarded to Kengeter last year will be clawed back, UBS said. Kengeter for 2010 received 3.34 million francs in the SEEOP awards, which vest in equal installments over five years, meaning that about 334,165 francs will be forfeited.

Employees of the investment bank who are key risk-takers, group managing directors or whose total bonus for 2010 exceeded $2 million will also be forfeiting 50 percent of Equity Ownership Plan awards that were due to vest in March.

The bank adjusted 2011 earnings to reflect an agreement entered with a monoline insurer this month, which if consummated will help UBS cut its exposure to legacy assets. The net after- tax effect of the adjustment reduced net income by 74 million francs, the bank said.

UBS is shrinking its investment bank as stricter capital requirements and the European sovereign debt crisis hurt profitability. The company plans to cut risk-weighted assets at the division by almost half under the Basel III rules, and reduce the number of employees to about 16,000 from 17,256 at the end of December.

The 12 members of the executive board in office on Dec. 31 received total compensation of 70.1 million francs for the year, compared with 91 million francs paid to 13 executives for 2010.

Gruebel was paid 2.23 million francs for his time in office last year. Together with former Chief Financial Officer John Cryan, who left at the end of May, and former Chief Risk Officer Maureen Miskovic, who was replaced Dec. 1., the three executives that left the board in 2011 got 7.05 million francs.

Villiger, who plans to step down at the annual shareholders meeting in May, was the highest-paid member of the board of directors, receiving total compensation of 1.49 million francs for 2011.

Axel Weber, who is due to take over as chairman after his election to the board, will be getting annual compensation of 2 million francs and 200,000 UBS shares blocked for four years. He will also get a one-time payment upon election to the board of 2 million francs and 200,000 UBS shares blocked for one year.

–Bloomberg