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proxy advisor ethos harshly criticizes ubs. proxy advisor ethos has sharply criticized swiss banking giant ubs. excessive compensation—particularly for the ceo—variable pay with an overly strong leverage effect, a share buyback program instead of building up equity capital, and setbacks and gaps in the sustainability report: this is the list of ubs's shortcomings, at least in ethos's view. in recent days, ethos reviewed the ubs 2024 annual report and sustainability report, both published in mid-march, and has now issued its recommendations for the upcoming annual general meeting on april 10. ethos expresses dissatisfaction with executive compensation, the share buyback program, and the sustainability report. as stated in a press release issued on thursday, the foundation recommends that ubs shareholders vote against these agenda items. ceo pay significantly above median. ethos criticizes that the level of compensation for ubs executives is too high—especially when compared to european peers of similar size. although ceo sergio ermotti’s compensation was not increased in 2024, his salary remains one of the highest in both switzerland and europe. ethos benchmarks this against the compensation of the ceos of the ten largest publicly listed companies in switzerland and the twelve largest european financial firms. ermotti’s pay exceeds the respective median by 53 percent and 139 percent. however, ermotti appears to be aligning his salary expectations more with his u.s. counterparts than with european ones. variable compensation under scrutiny. ethos also warns that the variable component could lead to excessive total remuneration. furthermore, the bank does not disclose the fair market value of long-term stock awards. vincent kaufmann, director of ethos, explains the rejection of the compensation report (which is subject to an advisory vote):«such high payouts and the very strong leverage on variable compensation can encourage excessive risk-taking—as we saw during the 2008 financial crisis and more recently with the collapse of credit suisse. these kinds of variable pay structures are not in the best interest of long-term-oriented shareholders.». share buybacks fuel executive pay. ethos also sees a link between the compensation system and share buybacks. the two performance metrics ubs uses for long-term incentives are return on core equity and relative total shareholder return. «meeting these targets can be mechanically influenced by reducing equity,» ethos states. long-term investors, however, are more interested in a stable bank «whose capital allows it to weather economic crises»—a role that implies not only ubs's own resilience but also its ability to help the broader economy through challenging times. against this backdrop, a bank as large—relative to the swiss economy—as ubs should hold substantial equity. should shareholders reject the buyback program, this would likely have a significant short-term impact on the share price. is more equity always better? ethos also addresses the ongoing political debate over the appropriate level of ubs’s capital reserves. «ubs’s size since acquiring credit suisse makes a future government bailout far more difficult. it is therefore essential that the bank strengthens its equity base. the board of directors’ proposal to repurchase and cancel shares contradicts this goal and the current public discussion.». in this, ethos aligns itself with the stance of the swiss federal council, the swiss national bank, and finma, all of whom advocate for higher capital buffers. however, ethos does not comment on the potential downside—namely, whether stricter capital requirements might hamper ubs’s development or weaken its global competitiveness in the long term. sustainability report: ubs lowers its ambitions. ethos’s rejection of the sustainability report is partly due to what it sees as a backsliding compared to the previous year. «the bank has weakened its commitments with regard to climate change, diversity and inclusion, and investment exclusion criteria.». ethos does not comment on the fact that esg criteria are currently under intense scrutiny by the new u.s. administration, despite the united states being a core market for ubs. significant gaps in emissions reporting. additionally, ethos points out «significant gaps» in ubs’s sustainability disclosures. «ubs’s transparency regarding financed emissions in the wealth management business is insufficient.» as a result, shareholders cannot assess the bank’s contribution to climate change or measure its progress in reducing its environmental impact. «the bank also fails to publish a coherent strategy for reducing greenhouse gas emissions, with clearly defined and quantifiable measures for achieving its targets.». founded in 1997, the ethos foundation currently counts 252 members—pension funds, collective foundations, insurers, and other foundations—collectively covering around 2,4 million insured individuals and managing chf 380 billion in assets. since its inception, ethos has focused on integrating environmental, social, and governance (esg) factors into investment decisions and promoting responsible, sustainable investing.
Proxy Advisor Ethos Harshly Criticizes UBS
Proxy advisor Ethos has sharply criticized Swiss banking giant UBS. Excessive compensation—particularly for the CEO—variable pay with an overly strong leverage effect, a share buyback program instead of building up equity capital, and setbacks and gaps in the sustainability report: this is the list of UBS's shortcomings, at least in Ethos's view.
In recent days, Ethos reviewed the UBS 2024 annual report and sustainability report, both published in mid-March, and has now issued its recommendations for the upcoming Annual General Meeting on April 10.
Ethos expresses dissatisfaction with executive compensation, the share buyback program, and the sustainability report. As stated in a press release issued on Thursday, the foundation recommends that UBS shareholders vote against these agenda items.
CEO Pay Significantly Above Median
Ethos criticizes that the level of compensation for UBS executives is too high—especially when compared to European peers of similar size. Although CEO Sergio Ermotti’s compensation was not increased in 2024, his salary remains one of the highest in both Switzerland and Europe.
Ethos benchmarks this against the compensation of the CEOs of the ten largest publicly listed companies in Switzerland and the twelve largest European financial firms. Ermotti’s pay exceeds the respective median by 53 percent and 139 percent. However, Ermotti appears to be aligning his salary expectations more with his U.S. counterparts than with European ones.
Variable Compensation Under Scrutiny
Ethos also warns that the variable component could lead to excessive total remuneration. Furthermore, the bank does not disclose the fair market value of long-term stock awards.
Vincent Kaufmann, Director of Ethos, explains the rejection of the compensation report (which is subject to an advisory vote):
«Such high payouts and the very strong leverage on variable compensation can encourage excessive risk-taking—as we saw during the 2008 financial crisis and more recently with the collapse of Credit Suisse. These kinds of variable pay structures are not in the best interest of long-term-oriented shareholders.»
Share Buybacks Fuel Executive Pay
Ethos also sees a link between the compensation system and share buybacks. The two performance metrics UBS uses for long-term incentives are return on core equity and relative total shareholder return. «Meeting these targets can be mechanically influenced by reducing equity,» Ethos states.
Long-term investors, however, are more interested in a stable bank «whose capital allows it to weather economic crises»—a role that implies not only UBS's own resilience but also its ability to help the broader economy through challenging times. Against this backdrop, a bank as large—relative to the Swiss economy—as UBS should hold substantial equity.
Should shareholders reject the buyback program, this would likely have a significant short-term impact on the share price.
Is More Equity Always Better?
Ethos also addresses the ongoing political debate over the appropriate level of UBS’s capital reserves. «UBS’s size since acquiring Credit Suisse makes a future government bailout far more difficult. It is therefore essential that the bank strengthens its equity base. The board of directors’ proposal to repurchase and cancel shares contradicts this goal and the current public discussion.»
In this, Ethos aligns itself with the stance of the Swiss Federal Council, the Swiss National Bank, and Finma, all of whom advocate for higher capital buffers. However, Ethos does not comment on the potential downside—namely, whether stricter capital requirements might hamper UBS’s development or weaken its global competitiveness in the long term.
Sustainability Report: UBS Lowers Its Ambitions
Ethos’s rejection of the sustainability report is partly due to what it sees as a backsliding compared to the previous year. «The bank has weakened its commitments with regard to climate change, diversity and inclusion, and investment exclusion criteria.»
Ethos does not comment on the fact that ESG criteria are currently under intense scrutiny by the new U.S. administration, despite the United States being a core market for UBS.
Significant Gaps in Emissions Reporting
Additionally, Ethos points out «significant gaps» in UBS’s sustainability disclosures. «UBS’s transparency regarding financed emissions in the wealth management business is insufficient.» As a result, shareholders cannot assess the bank’s contribution to climate change or measure its progress in reducing its environmental impact.
«The bank also fails to publish a coherent strategy for reducing greenhouse gas emissions, with clearly defined and quantifiable measures for achieving its targets.»
Founded in 1997, the Ethos Foundation currently counts 252 members—pension funds, collective foundations, insurers, and other foundations—collectively covering around 2,4 million insured individuals and managing CHF 380 billion in assets. Since its inception, Ethos has focused on integrating environmental, social, and governance (ESG) factors into investment decisions and promoting responsible, sustainable investing.
