Many shareowners have expressed their disagreement with the executive remuneration system of Credit Suisse Group. During today's general meeting, the remuneration report was subject to intense criticism: 66% for, 29% oppose, 5% abstention. These results indicate that investors do not back excessive remuneration.
In order to improve the remuneration system of Credit Suisse, Ethos asks that the Board of directors proceed to a consultation of all the shareowners on this issue.
Following the vote of the remuneration report, Dominique Biedermann, executive director of Ethos Foundation said: “Today's vote is a very clear signal to the board of Credit Suisse Group. The remuneration policy should be amended so that paying excessive remuneration is no longer possible. We now ask the board to organise a consultation of all shareowners on this issue.”
In anticipation of this general meeting, Ethos had recommended not to approve the 2009 remuneration report, as the remuneration system includes elements that can lead to egregious payments to executives, with a variable part exceeding ninety percent in 2009. A significant component of this remuneration comes from the new incentive plan SISU. According to this plan, after four years, every unit awarded is converted into shares, with a minimum vesting of one share regardless of the performance achieved and a maximum of 8.5 shares which is excessive.
Furthermore, the use of the return on equity as one of the two performance criteria is risky. This might lead executive management to pursue a reduction of the bank's equity, which is in direct contradiction with the expectations of the authorities, as well as with those of the long term shareowners.
Important Milestone: “Say on Pay” Gains Momentum
Following the “Say on Pay” resolutions submitted by Ethos and eight Swiss Pension Funds in 2009 and 2010, an increasing number of companies are accepting to implement an advisory vote on executive remuneration. As of today, 21 of the hundred largest Swiss listed companies (fourteen of which belong to the SMI) give their shareholders a say on pay.
The progress in terms of shareholder rights is encouraging. However, the problem raised by excessive executive remuneration has not been resolved. The shareowners should systematically exercise their rights, by voting at general meetings, especially when the remuneration system or report is put to the vote. For their part, the boards should take the signals sent by the shareholders very seriously.
