Wednesday, February 10, 2010

UBS Digs its Claws In, MS Faces Shareholders' Ire

On the heels more losses for UBS investors, shareholders can at least rest easy that management hasn't completely forgotten about them. Last year, the Swiss bank introduced a plan that would pay 900 million francs to managing directors in equal parts over three years, because even managers of the financial Titanic need to be motivated. The plan, however, came with clawback provisions in the event that the bank continued to post losses. At some point, management must've thought, we've got to stop losing money. Right? I mean, statistically it just can't be possible to continue to lose money like this, can it? Yet UBS managed to beat the odds by posting a 2.74 billion-franc loss for 2009, which sounds awful, unless you compare it to the prior year's 21.3 billion-franc loss. In any event, managers can say goodbye to the 300 million they were due to collect this year as it will be clawed-back. UBS is still paying out 2.9 billion francs in bonuses for 2009, so it's not like anyone is going hungry.

Speaking of comp, Morgan Stanley is finally stealing attention away from Goldman Sachs in the compensation ire department. After a lackluster year where the investment bank was short on profits, it still managed to fork over 62% of its revenues to employees. Shareholders are rightfully pissed off and are not going to let this type of thing fly anymore. Well, except for the guy quoted in the article who said:

"I'm willing to give them a free pass given the decline in revenue" last year, "but going forward, there needs to be an attitude that shareholders are first in line."

It's attitudes like these that have kept the comp scam going as long as it has. Willing to give them a free pass this year??? Why? In all the years, this is the year they shouldn't get a free pass. They got about two trillion free passes from the government. Zero percent interest rates? That's a free pass. How about $2 trillion in fixed income purchases from the Fed? Also a free pass. 62% of revenues in comp? Dude, grow a spine and sell your damn stock. I've been carping for some time about Morgan Stanley not getting its share of bad press compared to Goldman. I'm glad somebody is finally putting two and two together over how preposterous it is to grant pay packages based on competitors' performances.

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