MADRID/LONDON (Reuters) - Spanish lender Santander (SAN.MC) said on Tuesday that it would fight in court a lawsuit being brought by Italian banker Andrea Orcel after it dropped an offer to make him chief executive.
Ten months ago, the euro zone’s largest lender by market capitalization announced with fanfare its decision to name one of Europe’s best-known investment bankers as CEO.
Here are the main points on how things went sour:
On Sept. 25 last year, Santander announced the appointment of Italian banker Andrea Orcel as its new chief executive officer to replace Jose Antonio Alvarez and said the appointment was expected to be effective in early 2019 following regulatory approval.
Santander said Orcel would bring a deep understanding of retail and commercial banking, as well as a strong track record in managing diverse teams, and would help build a global digital platform.
Analysts at the time said they struggled to understand why Orcel, who had been the head of UBS Group’s (UBSG.S) investment banking business since 2014 and a member of the bank’s executive board since 2012, would become the CEO of a mostly dominant retail bank.
His appointment immediately raised questions about a potential change in Santander’s strategy.
Chairwoman Ana Botin responded that Santander was not planning any major strategy change and would remain a commercial bank operating in 10 countries.
Orcel resigned from UBS and was put on six-month gardening leave after signing a job offer letter from Santander.
However, on Jan. 15, Santander withdrew the offer to make Orcel CEO, making a rare, unexpected U-turn on such a high-level appointment.
Santander said the cost of compensating Orcel for the deferred awards he had earned over the past seven years at UBS and other benefits would be significantly above the board’s original expectations at the time of the appointment.
It did not mention any figures and did not say how big the pay gap was. But three sources with knowledge of the matter told Reuters the deferred payment amounted to about 50 million euros ($57 million).
At the beginning of March, Santander offered Orcel a senior advisory role in an attempt to mend fences with the former president of UBS’s investment bank, which he rejected, according to a source familiar with the matter.
In March, Orcel hired Spanish legal adviser De Carlos Remon to handle his dispute with the bank.
During an interview with the Financial Times in May, Orcel said: “I’m not known to be a person that lets go, especially when I think that the right thing to do is to not let go. It’s not only for me. Just imagine this situation on somebody who is less visible. It’s not right.”
In late June, Orcel made a 100 million euro claim against Santander as part of a civil lawsuit for breach of contract.
Santander was given about 20 days to respond to the lawsuit which 56-year old Orcel filed in a court in Madrid.
Orcel’s claims are based on a four-page letter - signed by Santander’s general secretary Jaime Perez Renovales in September - in which the bank formally offered him the job along with a stock and bonus package to compensate for deferred pay he risked losing by quitting UBS, a source told Reuters.
The package consisted of 35 million euros’ worth of Santander shares and a 17 million euro bonus that would only be paid if Orcel failed to recoup all or part of his deferred pay from UBS, a source with knowledge of the matter said.
Writing by Jesus Aguado; Editing by Ingrid Melander and Susan Fenton