UBS’s compensation policy aims to provide competitive total
compensation packages that will enable the firm to attract,
retain and motivate the talent it requires. The packages should
provide incentives that foster an entrepreneurial and performance-
oriented culture and support the firm’s integrated
business strategy.
Compensation of senior executives is closely linked to the
achievement of sustainable shareholder returns and provides
appropriate incentives for long-term value creation. It consists
of a base salary and a performance-based incentive component.
For 2004, compensation for senior executives totaled CHF
190.6 million, up from CHF 158.4 million in 2003. Both figures
include fixed base salaries, performance-related incentive
awards (paid in cash and UBS shares), options on UBS shares,
the employer’s contribution to retirement benefit plans, benefits
in kind and fringe benefits.
Total compensation levels are highly variable year-on-year
as they are performance-driven. The relative weight of the
components therefore varies significantly every year. In 2004,
base salaries constituted between 2% and 17% of the total
compensation for individual executive members of the Board
and members of the GEB. The incentive component, which
in 2004 formed the major part of compensation, is determined
on the basis of the financial performance of the firm
– measured against prior year results and established financial
performance targets. It is also a reflection of the individual
contribution of each executive. A substantial part is paid
in the form of restricted UBS shares. Long-term incentives in
the form of options on UBS shares awarded in 2004 accounted
for around 15% of total compensation. These options
were granted at a strike price that was 10% higher than the
average market value on the last trading day in February
2004.
The approval of senior executive compensation and the
design of senior executive compensation schemes are subject
to a rigorous process. The Compensation Committee of the
Board of Directors, which consists of independent members,
has a central role in the compensation process. No one has
any approval authority for his or her own compensation.
Details on executive and board compensation and shareholdings
can be found in our compensation report published
in our Handbook 2004 / 2005 or as a separate report (see
sources of information).
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