2023-05-27 19:27:07
Does Tidjane Thiam have to return his bonus?
The former CEO received more than 62 million Swiss francs from the bank. He was one of the architects of the downfall. Karin Keller-Sutter has five good reasons to claim back his bonus.
In the beginning they were like hearts: Tidjane Thiam, CEO of Credit Suisse (left), and Urs Rohner, the long-standing Chairman of the Board of Directors, in 2016 at the Sechseläuten in Zurich.
Photo: David Biedert
Karin Keller-Sutter’s disposal is tough. Credit Suisse must examine whether the millions paid out to Executive Committee members since 2019 can be reclaimed. The Minister of Finance ordered this on Tuesday.
Most would be with former chief financial officer David Mathers to get, who beautified the balance sheet with tricks – and with Tidjane Thiam. He was the last CEO who made really big money, but made a significant contribution to the downfall of Credit Suisse. He himself denied any guilt in Novemberbut there are at least five reasons why Keller-Sutter can insist on giving his money back.
The cornerstone of doom
When Thiam started his job in 2015, everyone was at his feet: the media, investors and, last but not least, the Zurich establishment. They all saw in him a kind of Barack Obama of Credit Suisse, who would help the second largest Swiss bank to shine again. Even the most powerful man in the Swiss economy for a long time, Rainer E. Gut, until recently Honorary President of the bank, was personally present at the press conference at which Thiam was introduced.
This was considered an accolade by the noble Zurich society. Urs Rohner personally gave him a villa in Herrliberg in 2015, which would later become famous in the espionage affair because of a neighborhood dispute over two trees. It was also Rohner who took Thiam with him to the Sechseläuten. Shortly thereafter, Thiam announced in the “Weltwoche” that he wanted to acquire the Swiss passport.
In terms of business, too, everything sounded promising at first. In autumn 2015, Thiam announced that the bank would earn CHF 10 billion a year within five years thanks to the restructuring he had started. And he promised nothing less than giving the Swiss credit institution back: Credit Suisse’s Swiss business should be listed separately on the stock exchange.
Nothing came of all the promises. Worse still, they later played a key role in the bank’s demise.
Embellished numbers
In reality, Thiam’s tenure began with losses of almost five billion francs in the first two years. He largely wrote off the premium paid by the investment bank for takeovers – the so-called goodwill – and made provisions for legal cases in the billions. While that made sense, it didn’t affect the bonus because the bank invented “adjusted profit”.
Thiam earned double-digit millions and received over 14 million francs right from the start for the share package to which he was entitled from his previous employer.
The table shows that in Thiam’s time, the “profit” relevant to the manager’s bonus was revised upwards by CHF 9.5 billion. In 2019 alone, the profit was corrected by one billion francs thanks to sales. The book profits later disappeared into thin air.
Thiam earned over 62 million francs in just under five years at Credit Suisse. There were more than ten of them in 2019 alone, his last year as CEO. Back then, the bank perverted the way it calculated bonuses. Officially, she emphasized that she wanted to reward management’s real contribution to profits, without special profits or special losses from company sales, expensive legal transactions or write-downs that had nothing to do with current management.
In reality everything was different. 2019 was not a bad year in itself, but of the group profit of a good 4.7 billion francs, 825 million came from the sale of a stake on the Swiss stock exchange and above all from the sale of the Investlab fund platform to the Spanish Allfonds Group.
This gave Thiam an additional bonus. However, the sale of Investlab two years later resulted in losses of hundreds of millions.
Devastating image damage
Although Thiam had to go because of the highly image-damaging scandal surrounding the shadowing of renegade Credit Suisse manager Iqbal Khan, the bank told him in the annual report that he had “set a good example in terms of personal commitment to standards of conduct and ethics of the group». And during his time as CEO, he “promoted team spirit and cooperation among the members of the executive board, which have spread throughout the organization”.
Thiam was sworn to silence, but he was able to go as a blameless manager – as a so-called good leaver – and received his salary until the end of August 2020. The Sunday newspaper wrote at the time, there was a dispute in the board of directors, which Credit Suisse denied in a counterstatement. It is still unclear how much Urs Rohner knew about the shadowing affair.
The seeds of billions in losses
Almost more important than the unjustifiably high bonus is that Thiam planted the seeds of doom. Both the billions lost with the insolvent financial construct Greensill and the 5 billion francs loss due to unsecured loans to the Archegos fund began under Thiam.
In 2019, Credit Suisse had Greensill answer critical questions from the Swiss Financial Market Supervisory Authority. The supervisory authority came to the conclusion last year that “in the context of the business relationship with Lex Greensill, the Credit Suisse Group has seriously violated its supervisory obligation for years”.
Archegos investigation report is still pending. The two scandals alone should actually be enough for Thiam to have to return part of his bonus.
The devastating design flaw
The plan to bring the credit institution back to the stock market led to a design flaw in the Credit Suisse group. In contrast to UBS, the bank did not book the funds of wealthy private customers in the part of the company that would have been saved in the event of bankruptcy, as was actually intended by the “Too big to fail” law.
According to general knowledge, this was one of the main reasons why more than 120 billion francs in customer funds were withdrawn, especially in Asia last autumn and then again in March. This ultimately led to the downfall of Credit Suisse.
Schema der Credit Suisse Holding
The money of international asset management clients was held by Credit Suisse AG, which had far too little equity and would have gone under according to the Swiss “too big to fail” regulation. Only the subsidiary Credit Suisse Switzerland would have survived.
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