The next few weeks are the most important in Marcel Ospel’s career. The chairman of UBS is under pressure to follow the examples of Stan O’Neal and Chuck Prince and fall on his sword in the wake of the Swiss bank’s horrendous performance over the past 12 months.
On February 27 he will have to battle with shareholders at an extraordinary meeting. They are increasingly angry about the disasters that have befallen UBS since 2007 – the Dillon Read Capital Management fiasco, the departures of several senior executives, the $14.5 billion of bad debt write-downs and the collapsing share price.
The meeting is being convened to approve the SFr13 billion ($11.3 billion) of investments from Singapore’s GIC and an unnamed Middle East investor. Some UBS investors had already voiced their displeasure at the capital injections, concerned by the source of the funds and the fact that the deal dilutes existing shareholder equity.
Ospel’s own future is not up for formal discussion, although it is bound to be an issue behind the scenes. The 57-year-old has to deliver the performance of a lifetime if he is to have any chance of holding on to his job.
Instead, Ospel’s positions as chairman and as a member of the board of directors, which are up for renewal every three years, will be voted on in April during the bank’s annual meeting. His critics already think that his time is up. It is easy to see why.
The UBS share price nosedived by 42% in dollar terms last year and is trading 15% down on where it was when Ospel became chairman in February 2001. The Swiss firm is one of the biggest casualties of the US sub-prime crisis, and no leading European bank has suffered as badly.
Then there is DRCM, the in-house hedge fund that has cost UBS millions if not billions of Swiss francs and its reputation as a savvy, conservative institution operating under the strictest risk management guidelines. The whole episode is one of the biggest disasters in European banking for more than a decade.
As chairman, Ospel bears some responsibility for these mistakes, even if others made the fateful decisions, and should be called to account. Yet shareholders must resist the temptation to oust him because his departure could leave the bank rudderless. UBS has a thin layer of talented people at the top.
Just look at how the investment bank is struggling to find a new chief executive. Instead Marcel Rohner, the group CEO, has taken on the leadership of the investment bank too. Although there is no time limit on this dual role, it is not a long-term solution. The problem is that it is difficult for UBS to attract talent from the outside, especially as bigger and more alluring financial institutions have also been in the market recently seeking a new chief executive.
Within the bank, meanwhile, there is no one with sufficient experience and gravitas to take on the job. The new head of fixed income, Andre Esteves, is touted as a future chief executive. However, he still has much to prove before he can contemplate such a promotion.
The lack of obvious internal candidates is partly of Ospel’s making after he dismissed several executives in the wake of the DRCM and sub-prime crises, including group CEO Peter Wuffli, investment bank head Huw Jenkins, as well as senior bankers lower down the management chain.
If Ospel were to be pushed out, the same problem facing the investment bank could surface at group level too. There is no obvious successor. Deutsche Bank boss Josef Ackermann, who is Swiss, has been named as a possible replacement. But why would he leave the more successful institution? The last thing UBS can afford in its darkest hour is a power vacuum. Instead of departing the stage with a hefty severance packet as compensation, Ospel should be made to clean up the mess he has helped to create.
