Chairman of the Board of Directors and executive members
of the Board of Directors
The new compensation model was not yet applicable in 2008
and the Chairman of the Board of Directors (BoD) was therefore
eligible, in principle, to receive a variable incentive award fully
dependent on the Group’s financial performance. However, as
announced in the compensation report published on 17 November
2008, the human resources and compensation committee
decided against granting any variable compensation award
to the Chairman of the BoD for 2008. The total compensation
awarded to the Chairman of the BoD, Peter Kurer, for the 2008
financial year was CHF 1,565,647. This amount made him the
highest-paid member of the BoD for 2008 and consisted of
eight months salary as Chairman of the BoD. This amount does
not include the four months of salary he received as a member
of the Group Executive Board (GEB).
Under both the new and old compensation models, the
decision process to determine the overall compensation of
the Chairman of the BoD includes an annual performance
assessment by the full BoD and the human resources and
compensation committee. Pay levels for comparable functions
outside of UBS are also taken into account.
Remuneration for former executive members and the
former Chairman of the Board of Directors
Marcel Ospel, former Chairman of the BoD, did not stand for
re-election at the AGM of 23 April 2008. Stephan Haeringer,
former executive vice chairman of the BoD, retired from the BoD
on 2 October 2008. Marco Suter, formerly an executive member
of the BoD, stepped down from the BoD on 1 October 2007 and thereafter acted as Group Chief Financial Officer (Group
CFO) and as a member of the GEB until his stepping down from
this role on 31 August 2008. While Marcel Ospel has retired
from UBS as of April 2008, Stephan Haeringer and Marco Suter
agreed with UBS to continue their services for UBS until their
termination dates of 30 September 2009 and 31 August 2009
respectively.
All three persons were contractually entitled to receive a
base salary, a payment based on their average remuneration
over the last three years and certain employment benefits
until the expiry of their 12-month notice period.
For the fiscal years 2007 and 2008, Marcel Ospel, Stephan
Haeringer and Marco Suter did not receive any incentive
awards. Furthermore, on 25 November 2008, Marcel Ospel,
Stephan Haeringer and Marco Suter announced that they voluntarily
relinquished substantial parts of the payments to which
they were entitled during their periods of employment with
UBS. The total amount waived or repaid was CHF 33 million.
The remaining contractual obligations to all three former
BoD members, consisting of those due in 2008 and those
upcoming in 2009, net of the CHF 33 million voluntarily
waived or repaid, amounted to CHF 10 million. This amount
has been fully accrued in 2008 and is reflected in the firm’s
2008 income statement. Of this amount, CHF 2.3 million
was for Marcel Ospel, CHF 3.9 million for Stephan Haeringer
and CHF 3.8 million for Marco Suter.
Independent members of the Board of Directors
Reflecting their independent status, the remuneration of independent
members of the BoD includes no variable component
and is therefore not dependent on the financial performance
of the UBS Group (Group). Fees for independent members are reviewed annually by the Chairman of the BoD
and the human resources and compensation committee for
approval by the BoD. None of the independent members of
the BoD has any contract with UBS providing for benefits
upon the termination of their term of office at the BoD.
The BoD substantially reduced the fees payable to members
of its committees for 2008. This decision was made following
consideration of market practice in comparable global financial
services and other relevant companies in Switzerland.
The table on the prior page shows remuneration for independent
members of the BoD between the 2008 and 2009 AGMs. |  | In 2008, total compensation for members of the GEB was
reduced significantly from the prior year. The reduction occurred
because, due to the overall negative Group result, no
variable compensation was granted to GEB members for the
performance year 2008. The total compensation for the
highest-paid member of the GEB, Marcel Rohner, amounted
to CHF 1,814,702 for the financial year 2008.
Base salary
Base salaries are established to be appropriate for the role of
each senior executive on an individual basis. Base salaries consist
of a fixed amount of compensation and any adjustments
are limited to significant changes in job responsibility.
Due to the variability of annual incentive awards, the ratio
of base salary to total compensation can vary significantly from
year to year. Since no variable incentive awards were paid for
the financial year 2008, base salaries for senior executives and
employers contribution to retirement benefit plans amounted
to 93.7% of total compensation compared with 20.6% in
2007. The remainder of 6.3% reflects benefits in kind.
Benefits
In order to help attract and retain the best employees in each
local market where it operates, UBS provides employee benefits
that are competitive within each of these markets.
Changes, terminations and the introduction of new benefits
are governed by the procedures contained in the “Organization
Regulations of UBS AG”. UBS considers benefits to be a
supplemental element of total compensation and the benefits
offered may vary substantially from location to location.
Generally there are no special benefits for senior executives;
they receive the same benefits as all other employees
in the location and business where they work.
In Switzerland, senior UBS executives share the same retirement
plan benefits as all other employees. The firm’s general
pension plan is made up of two defined contribution
elements: one plan covering base salary and the other covering
variable compensation.
Outside Switzerland, senior UBS executives participate in
appropriately-designed local pension plans (in which other
employees also participate) which do not provide special provisions
for senior executives. In the US, senior executives can
choose to participate in a 401K-defined contribution plan
which is open to all employees. In addition, some executives
participate in legacy defined benefit plans which were available
to other employees but are no longer available to new
hires. In the UK, senior executives either participate in a pension
plan operated on a defined contribution basis or participate
in a legacy defined benefit plan which was open to all
employees but is closed to participation for new hires. No
special pension schemes are offered to senior executives.
Cash and equity incentives
“Pay for performance” is the guiding principle of the UBS
executive compensation policy. As discussed above, the human
resources and compensation committee decided not to
grant any variable cash or equity compensation to GEB
members for 2008. This decision recognizes the overall poor
performance of the Group and the failure to achieve key
performance targets despite some highly successful businesses
within each of the business divisions.
Replacement of forfeited awards for former employer
compensation
Jerker Johansson and Markus Diethelm joined UBS during
2008. In total, they were granted 574,432 shares with a grant
date fair market value of CHF 10.7 million, 700,000 options
with a strike price of CHF 36.46 and 7,420 options with a strike price of CHF 28.10, as well as a cash amount of CHF 370,000.
In line with market practice, these awards were granted as a
replacement for compensation and benefits forfeited from
their previous employment as a result of joining UBS.
Employment contracts
There were no material changes to employment agreements
for existing GEB members during 2008 and the 12-month notice
period remained unchanged for the financial year 2008. |
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