UBS has implemented changes to its compensation framework to better align employee and shareholder interests.
According to the bank’s Fourth quarter 2012 report, these changes aim to focus employees on medium and longer-term performance, provide them with the opportunity to benefit from the bank’s long-term success, and make the compensation framework more transparent.
The changes include:
- Longer deferral periods.
- Multi-year performance conditions on equity-based deferred compensation.
- A new loss-absorbing high-trigger deferred capital instrument.
- A reduction in the maximum amount of immediate cash paid as performance awards to individual employees.
These compensation decisions, both with regard to UBS’s overall performance award pool and to changes in its compensation model, are based on a variety of factors, including in-depth discussions at the 2012 annual general meeting with its largest shareholders to better understand their views around improving compensation plans and disclosures.
In the report, Axel Weber, chairman of the board of directors, and Sergio Ermotti, group chief executive officer, said: “The changes include multi-year performance conditions, which incentivise a stronger focus on results and our value proposition.
“Overall vesting periods have been lengthened, including those for the equity ownership plan. Additionally, the immediate one-year cash cap for individuals has been reduced by half, while the amount of shares a group executive board member is required to hold has been increased.”
The report also found that UBS’s award pool for 2012 was reduced by 7% year on year to CHF 2.5 billion.
More details on UBS’s compensation decisions for 2012 will be published in its 2012 compensation report next month.