In 2016, UBS businesses were exposed to a variety of adverse factors which resulted in a challenging year for the industry. Despite the challenges we faced, UBS delivered a solid financial performance and demonstrated that a balanced business mix and geographic diversification are important differentiators for the firm. Our compensation decisions reflect delivery of competitive compensation for strong performance while balancing returns to our investors and meeting global regulatory capital requirements.
Performance achievements and performance award pool
Despite continued strong industry-wide headwinds in 2016, including a challenging market environment and negative investor sentiment, we delivered solid results while prudently managing resources and risk. We also increased our cost savings run rate by around CHF 0.5 billion to CHF 1.6 billion.
UBS’s net profit attributable to shareholders was CHF 3.2 billion. UBS’s capital position remained strong, with a fully applied CET1 capital ratio of 13.8% and a fully applied CET1 leverage ratio of 3.5%. The Board of Directors (BoD) intends to propose a dividend of CHF 0.60 per share to shareholders for the financial year 2016 which is unchanged from the ordinary dividend for the financial year 2015.
In line with the Group and business division performance in 2016, the firm’s total performance award management pool for the year was CHF 2.9 billion, down 17% from 2015. As in previous years, the overall performance award pool was determined based on a range of performance considerations including risk-adjusted profit and capital strength.
The performance award pool for the Group Executive Board (GEB), including the Group CEO, was CHF 71.9 million. As a percentage of the adjusted Group profit before tax, the GEB performance award pool was 1.3%, well below the cap of 2.5%.
2016 compensation framework
Our compensation framework has remained largely unchanged since 2012 with no material changes for 2016. We focused on ensuring stability of our overall framework and reinforcing our principles. The consistency in our approach to compensation over the past five years has strengthened our culture of sustainable performance, accountability and appropriate risk-taking.
Compared with most of our peers’ compensation frameworks, we believe our framework ensures a closer alignment of employee and investor interests by linking a greater proportion of variable compensation to the firm’s own equity and debt instruments and subjecting awards to longer deferral periods. For all employees with a total compensation above CHF/USD 300,000, a specific amount of the overall performance award is deferred.
For 2016, 48% of the overall performance award for this group of employees was deferred. For the GEB, including the Group CEO, on average, 84% of their performance awards were deferred.
With this approach, our compensation framework rewards longer-term performance, supports our capital base and allows us to pay competitively. As of 31 December 2016, CHF 2.3 billion of the Deferred Contingent Capital Plan was included in our eligible capital and contributed 1.0% to our loss-absorbing capacity ratio.