High-profile Swiss bankers are frequently bashed on pay and bonuses. finews.com looks at lesser-known financiers who earn just as richly – without the backlash. 

Bankers are eluding an annual testy showdown with shareholders over pay – the coronavirus outbreak has put the kibosh on in-person meetings. Pay is traditionally a centerpiece of these meetings, and the public outcry over salaries and bonuses has widened.

If shareholders used to focus on variable pay at major banks like UBS, smaller firms are increasingly coming under scrutiny. Last year, management of family-controlled Vontobel was punished for comparably modest million-Swiss franc salaries for CEO Zeno Staub and Chairman Herbert Scheidt (this year, a sizable share of non-family shareholders rejected share-based awards for top management).

Other financial services firms like Julius Baer, GAM, and Leonteq have also been forced to review their pay schemes in recent years following shareholder backlash. 

More «Upside» Than «Downside»

Investors don't appreciate that CEO bonuses don't seem to contain as much «downside» if companies fail to perform than they do «upside» in good years. The share price performance and pay at UBS and Credit Suisse are divergent, for example. Pay schemes and performance criteria are often opaque to shareholders.

Investors and shareholder rights groups are equipped with more sophisticated studies and analysis to underpin their criticism: U.S.-based As You Sow found that shares of companies with highly-paid CEOs tend to perform worse than their less-well-paid peers, for example.

Big Paydays and False Values

In addition, banks and finance institutes have embraced corporate and social responsibility criteria – which is hard to reconcile with bonus excess of the past. A growing income divide also factors in: As You Sow calculated that CEO compensation has risen by 50 percent since the 2008/09 financial crisis, while those of rank-and-file employees has stagnated.

But how much is genuinely too much – what is the science behind excessive pay? If double-digits are unacceptable, UBS boss Sergio Ermotti (12.5 million Swiss francs, or $13 million) and Credit Suisse CEO Tidjane Thiam (10.7 million francs) would be pilloried for their paydays last year.

Another frequently used measure is the multiplier: how many more times higher is the CEO's pay compared with the median of his or her employees? finews.com chose a third option: how big is the share of CEO pay of overall profits?

The result shows that the CEOs of Switzerland's largest banks – which traditionally come in for the worst bashing – are in no way the worst offenders:

loehne ceo 1

Specifically, some CEOs of smaller banks and financial firms are richly paid: Vontobel CEO Staub earns every 65th franc in profit. Leonteq CEO Lukas Ruflin takes home every 32nd franc in bottom line profit. 

Excessive vs Fair

Bellevue CEO tops the tables: his 2 million franc annual salary represents every ninth franc the Swiss bank earns. His salary isn't the highest in absolute terms, but seems frothy given that Bellevue's 100-employee business isn't overly complex or large.

Calling out Rueegg and Bellevue for excessive pay is oversimplified: for context, the Swiss bank emphasizes that executives and bankers are entrepreneurs, and are invested in the success of Bellevue via their own money.

Reap What You Sow

Bellevue told finews.com that Rueegg had substantially defined the build-up of its asset management arm, and earns a profit share. The bank also argued its share awards scheme is uniquely entrepreneurial, which has paid off for shareholders in value created.

In 2011, two years after Rueegg joined and when Bellevue's asset management arm was nascent, he earned 300,000 francs – including his bonus. 

Fat Paydays as Natural Law

The comparison of profit to bonuses illustrates that criticism of banker pay needs context: simply decrying double-digit million awards is short-sighted.  Big paydays are fine – as long as finance firms create transparency over how pay and bonuses are granted, and allows them to fluctuate with personal entrepreneurial risk and performance.

This is infrequently the case in finance, where salaries and bonuses are a function of favorable markets which view compensation as a kind of natural law. That's no longer a strong enough case for fat bonuses.