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ZURICH/LONDON (Reuters) - UBS drew fire on Thursday as it announced it paid CEO Sergio Ermotti almost $9 million in 2012 and welcomed a new investment bank chief with a $26 million package, just as the Swiss bank is in the process of firing 10,000 staff.
Executive pay in Switzerland remains a heated issue five years after the near collapse of UBS, blamed by many on a big bonus culture driving bankers to take excessive risks.
"UBS has still not learnt from the mistakes of the past," said Brigitta Moser-Harder, an outspoken retail shareholder of UBS who campaigned for strict controls on executive pay that were adopted in a Swiss referendum earlier this month.
Investment bank chief Andrea Orcel, who is overseeing a radical restructuring of that operation in which 2,000 jobs are expected to go, secured a package worth 25 million Swiss francs ($26.27 million), according to UBS's annual report on Thursday.
It comprises $6.364 million in deferred cash and deferred UBS shares worth 18.5 million francs ($19.44 million) at the grant date. The deferred cash and shares will vest in installments in 2013, 2014 and 2015.
The deal was designed to replace forfeited pay from his former employer, Bank of America Merrill Lynch, after he joined the Swiss bank in July 2012. Orcel's regular salary for 2012 was not disclosed.
Moser-Harder told Reuters that Orcel's payment was outrageous: "Not only did the investment bank contribute a loss in the billions, it is also being massively scaled back."
The Swiss vote two weeks ago will give shareholders a binding vote on remuneration, ban big rewards for new and departing managers and impose possible jail sentences and fines for breaches of the new rules.
Swiss drugmaker Novartis was forced to scrap a proposed $78 million payment to outgoing chairman Daniel Vasella in February after a public outcry.
UBS Chairman Axel Weber, whose 4 million franc signing-on fee sparked enough shareholder anger to garner a one-third opposition to the bank's overall pay scheme last year, earned 3.57 million francs in 2012.
The news follows another turbulent year for UBS, which posted a full-year net loss after saying it would fire 10,000 employees as it exits large parts of its fixed-income business.
In December UBS said it would have to pay $1.5 billion to settle its role in a multi-year global rate-rigging scheme.
In an internal memo, Weber defended the payments, noting the executives did not receive any cash bonuses, but were rewarded with deferred instruments subject to the risk of forfeiture.
"Negative results that arise due to issues from the past and the acceleration of restructuring at UBS should be viewed differently from an operating loss," he said, adding the UBS share price rose by 28 percent in 2012.
"We reduced our risks substantially in 2012, and shrunk our balance sheet. UBS's capital strength under Basel III is now clearly industry leading. We have also regained client confidence in Switzerland and abroad."
Ermotti was the Swiss bank's highest earner last year, piping Americas wealth management division head Robert McCann, who was paid most in 2011. McCann earned 8.56 million francs in 2012, compared with 9.18 million in 2011.
UBS cut its overall bonus pool for 2012 by 7 percent to 2.5 billion francs and introduced a scheme under which bankers can be paid in a form of deferred financial instruments that are revoked if the bank's capital targets are not met.
Weber said the total compensation for the top management team had also been cut by 7 percent, with McCann seeing his bonus down 8 percent despite the fact his division achieved record results in 2012.
Ermotti's pay is a 40 percent increase on 2011, but he only joined the bank in April of that year and was named CEO in November 2011 after a $2 billion rogue-trading scandal felled his predecessor, Oswald Gruebel.
The CEO's base pay was 2.5 million francs, with more than 6 million francs in bonus awards.
In January, Jamie Dimon, JPMorgan Chase's Chief Executive, had his 2012 bonus cut in half after $6.2 billion of trading losses in the "London Whale" affair.
Barclays Chief Executive Antony Jenkins got a package worth 2.6 million pounds ($3.88 million) for 2012, while RBS boss Stephen Hester received 3.27 million pounds, but waived his bonus after the bank suffered a computer systems failure.
UBS's shareholder meeting is on May 2. Rival bank Credit Suisse is expected to disclose its top management and board pay on March 22. ($1 = 0.9518 Swiss francs) ($1 = 0.6700 British pounds)
Writing by Emma Thomasson; Editing by Jon Boyle