Credit Suisse Group AG Chairman Axel Lehmann apologized to angry shareholders for failing to stem a loss of trust that sealed the fate of the Swiss lender after 167 years.
(Bloomberg) — Credit Suisse Group AG Chairman Axel Lehmann apologized to angry shareholders for failing to stem a loss of trust that sealed the fate of the Swiss lender after 167 years.
Speaking to more than 1,700 attendees at the firm’s annual general meeting in Zurich, he and Chief Executive Officer Ulrich Koerner recounted how they tried to stabilize the bank before the government-brokered takeover by UBS Group AG.
The mea culpa comes after Credit Suisse last month agreed to the 3 billion-franc ($3.3 billion) deal to put an end to a crisis of confidence in the lender. The shareholder meeting is the first occasion in years where investors are be able to confront management face-to-face. Previous meetings were held virtually due to the Covid-19 pandemic.
Key developments:
- Emotions running high as investors lament end of Swiss institution
- Shareholder adviser blames pay structure, sees chance to attack deal
- Chief Executive Officer Ulrich Koerner says management ran out of time to save bank
- Chairman Axel Lehmann says he’s “truly sorry” for failing to save the bank
Here’s the latest. All times are Zurich local time
Shareholders narrowly pass compensation report (1:49 p.m.)
Much of the ire directed at Credit Suisse executives in Zurich has been over the bank’s pay and compensation practices over the years as it booked losses. Nevertheless, shareholders approved the annual compensation report again, but by the thinnest of margins. Just 50.06% of holders pressed the green button on the voting machines in the conference hall. Some 49.38% rejected the report, and 0.56% abstained.
To recap, Credit Suisse executives have foregone their bonuses for 2022, and employees with deferred pay outstanding have also seen that frozen.
‘You can almost taste the frustration’ (13:30 p.m.)
A second-year economics student representing his elderly father, a longtime shareholder of Credit Suisse, said that surely Lehmann could feel the palpable tension in the room. “You can almost taste the frustration and anger today,” he said, adding that everyone in the room had stayed invested on the trusting the words of both Lehmann and Koerner about the bank’s ability to survive.
“I am sure you understand very well and share our grievances, but the difference between you and us is you have the power to take action. So please, in the name of everyone here, please take action,” he said, lamenting the seething annoyance shareholders have at the hugely diluting share conversion that is part of the UBS acquisition of Credit Suisse.
Lehmann said that the bank was looking into all options “until the very end”. He added that the bank’s main focus, and most important stakeholder going forward, is the employees who are bearing the brunt in their contact with clients and exposure to everyday public criticism.
Lehmann concedes bonus mismatch (1:20 p.m.)
Credit Suisse’s directors faced shouts and jibes from angry investors in a meeting that has stretched on several hours. One shareholder asked the board how they could sleep at night. Another offered a bag of walnuts they said was worth the same as a Credit Suisse share. A third unveiled a spray-painted T-shirt reading “Stop the rip off.”
Shareholders also point to the discrepancy between bonuses and profits. In the past dozen years, Credit Suisse put 35 billion francs into its annual bonus pools, according to Bloomberg calculations. The total profits it generated in that period: 35 million francs.
“If you take a look at the profits we generated over the past 10 to 15 years and the amount we paid out to shareholders – if you compare that to the bonuses that were paid out, then there is very probably a certain imbalance there, objectively,” Lehmann said.
Lehmann also said he felt many of the same dismayed emotions as shareholders and repeated what the management had tried to do to save the bank with their last restructuring attempt.
A code of ethics for Swiss banking (12:40 p.m.)
This meeting is arguably more about letting shareholders vent after three-years of scandals and mismanagement. But many acknowledge it is too little too late for their suggestions and feedback, and the deal is done.
Shareholder Christine Renaudin, a lawyer who said she took the train from Lausanne at 4:30 this morning, argued that Swiss banking should adopt an ethics code so that lessons can be learned. She suggested it be delivered personally to incoming UBS CEO Sergio Ermotti. Lehmann said he would make sure it got to him.
Emotions running high among shareholders (11:52 a.m.)
A tearful shareholder and former employee Francesco De Giorgi condemned the bank for the situation. “Your money is no longer safe in Switzerland. And this is the fault of our board and your company for this mess.”
He added that he was ashamed as a former employee of Credit Suisse. “I also feel responsible for this disaster,” he concluded, followed by a round of applause from the audience.
Shareholders challenge limits to speaking time (11:38 a.m.)
When lawyer and shareholder Patrick Salzmann had the floor, he went through a series of questions that exceeded his 5-minute allocated speaking time. At several points Lehmann tried to intervene, urging him to wrap up, but the chair was himself interrupted by several other shareholders in the room telling him to let the man finish. Salzmann insisted that he had the right to speak, and finished by proposing a motion to the floor that a special auditor be appointed to answer his questions. Lehmann demurred.
Many shareholders have sent a list of detailed questions ahead of time to the board of directors, as they expect to exhaust their 5 minutes of allocated speaking time. They expect detailed responses in the meeting’s minutes which will be published at a later date. They are instead using their speaking time to ask their most pointed questions and to express their emotion: anger, shame, sadness.
Speaker laments lack of ‘malus’ system (11:55 a.m.)
Shareholder Daniel Engler lamented that the board had not implemented a bonus and malus system in which bankers would pay with their own private wealth when the company experienced losses. Lehmann responded that executives had been working on a transformation of the bonus culture of the bank when the crisis struck.
Proxy adviser sees chance to attack deal (11:21 a.m.)
Vincent Kaufmann, Ethos CEO, says he believes that compensation was a reason CS staff took risks. He says he believes, even if chances are slim, shareholders can still attack the deal under a specific article.
“It is your duty in fact as members of the board to recognize the responsibility that you and previous leadership have for this entire disaster. We have plenty of questions we have sent to the board and we expect an answer. What is the financial basis and the basis of which dates was the merger bid agreed? Was there a fairness opinion? How has the board assured the limit of the damage to the shareholders?”
Shareholder feels cheated (11:15 a.m.)
“Political masters have been dozing on the job for the last 15 years,” said Guido Röthlisberger, a shareholder. “The government should have been keeping a better eye on what was going on and making sure the rules were being followed.”
“Ms. Keller-Sutter was completely out of her depth, I think, in her role in dealing with the banking crisis,” he said. “I think it was possible to do this deal without an emergency decree, we had an AGM, and I feel I have been cheated. “
He said he donned his red tie “to represent the fact that I and any others are seeing red today.”
CEO Korner says ‘we ran out of time’ (10:30 a.m.)
“The collapse of Credit Suisse would have been catastrophic not just for Switzerland but for the global economy,” Chief Executive Officer Ulrich Koerner said in the text of his speech. “We no longer had a choice.”
Shareholders and proxy advisers indicated prior to the meeting their intention to vote against the reelection of several board members including Lehmann and expressed discontent with the board of directors and management’s leadership of the bank. It’s still unclear which of the failed bank’s top executives will survive the takeover, with Lehmann and Koerner seen exiting.
“We ran out of time,” Koerner said about the failure to save Credit Suisse. “What has happened over the past few weeks will continue to affect me personally and many others for a long time to come.”
Lehmann says ‘I am truly sorry’ (10:30 a.m.)
“We wanted to put all our energy and our efforts into turning the situation around and putting the bank back on track,” Lehmann said in the text of his speech. “It pains me that we didn’t have the time to do so, and that in that fateful week in March our plans were disrupted. For that I am truly sorry.”
His apology was met with half-hearted applause by an audience that included many former Credit Suisse employees, as well as a few “boos.”
The deal was agreed without the approval of either Credit Suisse or UBS’s shareholders, underscoring the urgency for the Swiss government to orchestrate a solution. In announcing the acquisition, it cited an article of the constitution that allows it to issue temporary ordinances “to counter existing or imminent threats of serious disruption to public order or internal or external security.” In this case, this included overriding merger laws on shareholder votes.
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