ZURICH (Reuters) - UBS shareholders should oppose discharging the board and top management of Switzerland’s biggest bank from liability after a guilty verdict in a French tax evasion case, proxy adviser Institutional Shareholder Services (ISS) said.
“A vote against the formal discharge of the board of directors and senior management is warranted on a precautionary basis, as the company was recently found guilty of illegal solicitation and laundering the proceeds of tax evasion by a French court,” ISS said in a statement received by Reuters on Monday, ahead of UBS’s May 2 annual shareholders meeting.
This is the latest opposition from shareholder advisers after a French court in February found UBS guilty of illegally soliciting clients and laundering the proceeds of tax evasion, ordering it to pay 4.5 billion euros ($5.1 billion) in penalties.
UBS denies the charges and is appealing against the ruling it has called “incomprehensible”.
A UBS spokeswoman declined to comment on ISS’s recommendations.
Ethos Foundation on Friday recommended UBS shareholders reject all of the Swiss bank’s executive and board pay proposals at the annual meeting, including binding votes on bonuses and pay packages.
Also last week, adviser Glass Lewis voiced its objections to the UBS pay proposal, citing “pay-for-performance concern”, and recommended shareholders abstain on the discharge question.
Even if ISS does not get its way, a significant showing of shareholder opposition to the board’s and management’s discharge would be a blow to Chairman Axel Weber and Chief Executive Sergio Ermotti, who last month boosted provisions to cover the case but said they still expect the verdict to be reversed.
Ermotti has said he “disappointed” by the court ruling, but highlighted the bank’s strong capital and liquidity as reasons UBS could afford to fight the French case.
A compliance expert and partner at Swiss law firm Lalive, Daniel Buehr, said a company’s board is most accountable, since its members are tasked with making certain that management in important legal cases works in the interest of the company and is not driven by personal motivations.
“It can be damaging when managers commit their reputations and names and then cannot beat a retreat,” Buehr said.
“In such situations, which happen again and again because it’s human nature, it’s the board’s job to lead, to take control and manage the risks.”
Additional reporting by Oliver Hirt and John Revill; Writing by John Miller; Editing by Michael Shields/David Evans