Credit Suisse Group AG (CSGN), the second- biggest Swiss bank, raised Chief Executive Officer Brady Dougan’s total compensation by 34 percent for 2012, a year when net income declined.
Dougan’s pay of 7.77 million Swiss francs ($8.2 million) included fixed salary of 2.5 million francs, 3 million francs in short-term and 2 million francs in long-term variable compensation, the Zurich-based bank said in its annual report today. Dougan was paid 5.82 million francs for 2011.
The highest-paid member on Credit Suisse’s executive board was Robert Shafir, who currently co-heads the private banking and wealth management division. He earned 10.59 million francs for 2012 compared with total pay of 8.5 million francs for 2011.
The bank’s net income fell to 1.35 billion francs in 2012 from 1.95 billion francs the previous year, including the cost to settle litigation against the company announced last week and accounting charges related to its own debt. Excluding such charges and gains from the sale of real estate, stakes and units, profit almost doubled to 3.58 billion francs. Dougan said in an interview this month that pay for bankers is still outpacing shareholder returns, a dynamic that will change once the bank completes an overhaul of its business model.
“In the past few years, certainly, the shareholders have taken a bigger reduction in their returns than labor has within the business model,” Dougan, 53, said in the interview with Bloomberg Television’s Erik Schatzker. “That’s not sustainable. That’s not right.”
Credit Suisse said today it changed the compensation structure for its executives after feedback from shareholders. Executives’ bonuses for 2012 were made up of short-term awards, which included unrestricted cash and shares vesting over the coming three years, and a long-term deferred cash award vesting in the third, fourth and fifth years after the grant.
The bank also published target and cap bonus levels for the CEO and executive board members, expressed as multiples of base salary, and said they can be cut to zero if performance goals are not met. The target bonuses are aligned with competitive pay levels for comparable roles in the market, the company said. Credit Suisse said that no executive was awarded a bonus reaching his or her cap level for 2012.
Swiss voters in a referendum earlier this month backed a proposal giving shareholders a binding vote each year on executive pay as part of an initiative that also bans big payouts for new hires and departing executives.
“We believe in the equitable sharing of the future economic gains of Credit Suisse between its shareholders and its employees, and we will work to achieve a better balanced distribution to this effect going forward,” Aziz R. D. Syriani, chairman of the compensation committee, said in the report, adding that the board’s review will include the Swiss vote on pay. The bank also plans to restart buying shares in the market to meet delivery obligations under stock awards after its Swiss core capital ratio, which stood at 9 percent on Dec. 31, exceeds 10 percent.
Credit Suisse fell 1.6 percent to 24.91 francs by 10:16 a.m. in Swiss trading. The shares rose 0.9 percent last year, lagging behind the 23 percent gain in the Bloomberg Europe Banks and Financial Services Index, which tracks 40 companies, and a 28 percent increase at UBS AG (UBSN) (UBSN), the biggest Swiss bank.
The bank proposed to pay 10 centimes in cash and 65 centimes in shares as its dividend for 2012 after letting shareholders choose the previous year whether they wanted 75 centimes a share in cash or in stock to help the company build up capital ratios.
The 2012 bonus pool, including pay deferred into future years, rose 15 percent to 3.42 billion francs from 2.99 billion francs for the previous year, Credit Suisse said in the annual report. The bank said earlier this year it would pay out part of variable pay for top staff at the investment bank in cash that can be clawed back over three years. Employees were also eligible for deferred stock awards, some of which can be clawed back, and an asset-based instrument called Plus Bond as part of bonuses.
UBS, which cut its 2012 bonus pool 7 percent to 2.5 billion francs and paid out 500 million francs of that in contingent capital bonds that can be written off, said last week CEO Sergio Ermotti received 8.87 million francs in total compensation for the year. That was dwarfed by the 24.9 million francs in cash and stock that investment bank head Andrea Orcel received on joining the bank to replace pay he forfeited when he left Bank of America Corp.
Barclays Plc said earlier this month it awarded CEO Antony Jenkins 2.3 million pounds ($3.5 million) for 2012, 63 percent less than the salary and long-term bonuses for 2011 given to his predecessor Robert Diamond, who was ousted following the bank’s fine related to Libor rigging. Jenkins was CEO for only the final four months of 2012.
Credit Suisse said the target bonus for Dougan was 7.25 million francs and was capped at 11.25 million francs for 2012. For this year, provided his base salary stays unchanged, his target bonus is 6.75 million francs and is capped at 10 million francs.
To reach the target level of compensation, the bank’s underlying return on equity this year would need to be 11 percent compared with 10 percent in 2012, and would need to reach 16 percent for the cap to be awarded, the bank said. Performance objectives for the CEO also include an underlying cost-income ratio of 70 percent and an assessment of capital strength, strategy execution, risk management and the management of employees.
The average target bonus for executive board members was about 4.9 million francs and capped at about 6.6 million francs for 2012, according to the report.
The 13-member Credit Suisse executive board received total pay of 74.12 million francs, compared with 70.2 million francs in 2011. Total incentive compensation for the executive board is capped at 2.5 percent of group underlying net income, the bank said.
Chief Information Officer Karl Landert stepped down at the end of April, and Antonio Quintella, who headed business in the Americas, left the board at the end of May to become chairman of Credit Suisse Hedging-Griffo in Brazil. Osama Abbasi and Fawzi Kyriakos-Saad, who served as CEOs of the Asia-Pacific and European regions, respectively, as well as chairman of private banking Walter Berchtold, left the company in November after it announced a divisional reorganization.
Chairman Urs Rohner received total compensation of 5.23 million francs compared with 4.33 million francs for the previous year, the bank said.
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