In the run-up to the general meeting of Credit Suisse on 28 April 2017, Ethos opposes the re-election of several board members as well as the discharge of the board. In addition, in light of the poor results and the concerns regarding the bank’s capital ratio, Ethos also refuses the remunerations of the governing bodies and the dividend proposed by the board.
In light of the significant litigation involving the bank in the past decade, the enormous indemnifications and fines paid as well as the lack of strategic vision at board level, Ethos recommends changes at the top at the bank. Ethos therefore opposes the re-election of the chairman of the board, Urs Rohner, as well as the vice-chairman of the board, Richard E. Thornburgh. Early 2017, the bank was found guilty in the US of having sold toxic financial products in the years preceding the global financial crisis (2005-2007). The two board members were part of the executive management at the time, Urs Rohner as Chief Operating Officer and General Counsel and Richard Thornburgh as Executive Vice Chairman of Credit Suisse First Boston (until end of 2005).
This record fine led Credit Suisse to register new provisions for more than CHF 2 billion between December 2016 and March 2017. Since Urs Rohner has taken over the chairmanship of the board in April 2011, the bank has booked provisions of CHF 10.9 billion and spent CHF 7.4 billion to settle legal cases. In the same time period, Credit Suisse’s share has lost almost half of its value and the number of employees was reduced by 20% to 17’020 at the end of 2016.
In addition, Ethos notes the lack of clarity in the current strategy, in particular as concerns the IPO of the Swiss Bank. Ethos estimates that changes to the board have become necessary to restore investor trust.
Granting the discharge would be premature
The legal cases have multiplied these last years for Credit Suisse and there is no sign of ending as shown by the recent raids at offices of the bank in Amsterdam, Paris and London end of March. In light of pending legal cases, but also of accusations that the bank’s project finance breached internal standards (by financing companies involved in the Dakota access pipeline project that is planned to cross Native American reservations in Dakota in the US), Ethos considers that granting discharge to the governing bodies of Credit Suisse is premature at this point.
Excessive remunerations and an unreasonable dividend
Ethos also recommends opposing all points related to the remuneration of the executive management and the board. Ethos considers that the executive management should not have received a bonus in 2016 given the disappointing results of the bank. It is excessive to pay a total annual bonus of CHF 26 million to the 12 members of the executive management when at the same time Credit Suisse posts a net loss of CHF 2.7 billion. In addition, the average remuneration of CHF 1.5 million for each of the 939 employees designated as “Key Risk Takers” is unacceptable for Ethos.
Finally, Ethos considers that the board’s proposition to pay a dividend of CHF 0.70 per share (in cash and/or in kind) is hard to justify in a time where regulation demands a reinforcement of the capital ratio. The current capital ratio of the bank remains insufficient especially in terms of the Leverage ratio (CET1) which only stands at 3.2% end of 2016 as opposed to the 3.5% demanded by FINMA until 2019. The capital ratio could yet worsen if shareholders opt for a dividend in cash, corresponding to a maximum payout of CHF 1.46 billion.