Credit Suisse share issue for bonuses approved by slender margin

ZURICH Fri May 9, 2014 11:07am EDT

Swiss bank Credit Suisse logo is seen in front of its headquarters in Zurich May 2, 2014. REUTERS/Arnd Wiegmann

Swiss bank Credit Suisse logo is seen in front of its headquarters in Zurich May 2, 2014.

Credit: Reuters/Arnd Wiegmann

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ZURICH (Reuters) - Credit Suisse's decision to issue shares to pay staff bonuses received the backing of shareholders by the narrowest of margins on Friday, amid widespread criticism of the Swiss lender's remuneration policy.

Executive pay is a hot topic throughout the banking sector and represents the latest in a string of problems for Switzerland's second-biggest bank after it raised the pay of Chief Executive Brady Dougan by more than a quarter last year.

That increase was awarded despite Credit Suisse's failure to meet all its performance targets and boosting its reserves to deal with a U.S. investigation into its role in helping wealthy Americans to evade taxes.

At its annual shareholder meeting on Friday, a vote to issue new shares for staff bonuses garnered just over the two-thirds majority it needed to pass. Nearly 30 percent of investors opposed the move, more than the quarter of investors who opposed a similar measure last year.

Before the vote, Swiss shareholder groups Actares, Ethos and ZCapital came out against the proposal, as well as influential U.S. advisory group ISS. [ID:nL6N0NU4Z4]

"Pay at Credit Suisse is too high," Dominique Biedermann, director at Ethos, which advises investors holding 3 percent of Credit Suisse shares, told Reuters. "There is no reason why banks should pay executives twice as much as large industrial companies."

DIVIDEND PAYOUT ECLIPSED

Addressing the 1,543 shareholders, largely Swiss retail investors, Biedermann criticized Credit Suisse for paying a total of 1.36 billion Swiss francs ($1.55 billion) to 503 people it considers key to how the bank deals with risk - an average payment of 2.6 million francs.

"That is more than is planned for the 2013 dividend (of 0.70 francs per share)," Biedermann said.

A little more than 16 percent of shareholders also voted against the proposed compensation plan, which included a 9.8 million franc payout for CEO Dougan. This was nearly two thirds more than opposed the same measure last year. The plan was backed by 81.3 percent of shareholders.

This year's compensation vote was non-binding, but will be from next year after a proposed amendment was easily ratified at the meeting.

The Credit Suisse vote came a day after Asia-focused bank Standard Chartered saw more than 40 percent of its shareholders oppose its compensation plan and last month more than a third of Barclays' investors declined to back its pay policy.

On Wednesday, more than 11 percent of shareholders at UBS, Switzerland's biggest bank, voted against its bonus plan, with 86 percent backing the proposal.

Credit Suisse has been a lightning rod for criticism over pay in Switzerland since its decision to pay Dougan nearly 90 million francs in 2010, when a five-year share bonus program topped up his regular salary.

The chairman of the bank's Compensation Committee, Jean Lanier, told investors ahead of Friday's vote that the bank had listened to shareholder concerns to produce a stable and understandable compensation structure.

'INTEGRITY AND FAIRNESS'

"We have, of course, to evaluate our practices and procedures ... without forgetting the reason for compensation, which is to attract, motivate and retain employees who share our values and achieve results for our company with integrity and fairness," Lanier said.

The bank's executive board was grilled by shareholders for more than two hours at the meeting, with one shareholder demanding a personal response from American-born Dougan on a potential conflict of interest because he leads the banks activities in both Switzerland and the United States.

"I'm not perfect, I'm sure," Dougan responded. "But I try very hard, and I don't think there's any conflict of interest."

Credit Suisse is currently being investigated by the U.S. Justice Department over the bank's role in helping wealthy Americans evade U.S. taxes. The bank may end up having to pay as much as $1.6 billion, a person familiar with the matter told Reuters on Monday.

Credit Suisse Chairman Urs Rohner reassured shareholders on Friday that the bank is working hard to seek a settlement with U.S. authorities.

"We are doing everything we can to resolve this matter within the given framework of U.S. and Swiss law, in the best possible way and in a timely manner," Rohner said.

(Additional reporting by Oliver Hirt; Editing by David Holmes and David Goodman)

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