Daily Lesson from Life 17 October 2008

"Pay back your bonuses
Angry Swiss tell former UBS chiefs to return fat bonuses they had raked in. -Fri, Oct 17, 2008 AFP

GENEVA - SWITZERLAND reacted angrily on Friday against former top managers of Swiss banking giant UBS, calling on them to return their bonuses, after the bank had to be rescued by the state from the credit crisis.

'Mr Ospel, pay back your bonus! Now! Immediately!' screamed the front page of tabloid Blick, referring to former UBS chairman Marcel Ospel.

In an interview with Swiss weekly magazine Bilan earlier this year, Swiss president Pascal Couchepin said, 'I'm outraged that Marcel Ospel has earned Pharaoh-like salaries for four to five years and that when the bank wobbles, he can keep it all.'


Blick pointed out that while Mr Ospel had given up his bonus in 2007, he cashed in 24 million francs' worth of bonuses in 2006.

'As a reminder - Under Mr Ospel's leadership, UBS tumbled into its deepest crisis ever,' said the newspaper.
The centre-right political party FDP also called on former UBS managers to return their bonuses.


'To be liberal means no free pass for irresponsible leadership of companies... The previous leadership of UBS had collapsed. We demand that they at least pay back the bonuses they had received in the past years,' the party said in a statement.

But the bank's current chairman Mr Kurer said in an interview with Tages-Anzeiger newspaper that there were no legal grounds to seek the money back.


'It was simply errors of judgement and management,' he said. 'In order to demand money back from someone, you need to prove that in the legal sense, a wrongful act was committed. That was not the case. There is no legal grounds to demand that the bonuses be returned.' "

A hot topic. One that has been discussed many times over and for the longest time too! The last time people, not just the business people discussed feverishly about over-sized CEO packages was during the 'corporate scandals filled era of Worldcom, Enron, Tyco, etc. Oh, not forgetting the infamous Mr Grasso of ex-NYSE US$90+m pay (if I recalled correctly) or the more recent Home Depot CEO who were ousted with a gold parachute totally USD200+m!! In fact one of the pre-eminent executive compensation experts even felt compelled enough to switch camp and became a crusader against obscene and greed-filled executive compensation package!! Alas, nothing concrete was really done. Life goes on...

Lessons for me:

1. do not believe for a minute that a CEO a company made! No ONE person can make a company ticked! Of course strong and ethical leaders can and will influence a lot of people who work with him or her to be committed with aligned goals and objectives;

2. be courageous when refusing an 'exit package'. You see if the CEO candidate is so good, there is NO reason to ask for an 'exit' package! The focus should be on 'how much variable bonuses can I give you from the PROFITs you are going to help the company made' instead of 'if I am wrongly dismissed or asked to leave due to poor business results that were influenced by factors beyond my control, you should pay me XXXX dollars!';

3. as leader with a good value, with good ethical sense, paying yourself more than 10x the lowest pay employee in your organization is immoral! This standard may be too strict for some but I am talking about FIXED SALARY. For the variable bonuses, it can be no limit as long as it is taken from the profits made and that shareholders approved it!

Will a revolution occur on this front? I am not too optimistic as it is hard to ask the fat cat not to assign another fat cat to watch over the prized fish. It is unnatural for the cat to not eat the fish that it is asked to watch over. But try we must! Otherwise, there is no progress and ordinary people will be the victims and shouldering most of the cost of overpaying CEOs!!