Morning Coffee: Credit Suisse was run by incompetent non-bankers paid $1m+. It's not just bonuses that are falling
That Credit Suisse was beset by incompetence has been clear for a while now. Even before the bank was rescued by UBS, the i-word was used in relation to the enormous Archegos loss. Fingers have been pointed at incompetents among senior management and among middle management. But now the Wall Street Journal thinks it's found the seat of the problem: Urs Rohner, Credit Suisse's chairman, during whose 10 year tenure, Credit Suisse's share price fell 75%.
Rohner, a lawyer, presided over a board comprised of various people without banking backgrounds who were typically paid in excess of $1m+, says the WSJ. They included: a Harvard professor studying workplace gender equality who was a former inventor at Google; a Qatari Royal; the son of a former Credit Suisse chairman; and the CEO of the drugmaking firm Roche.
Rohner also hired Tidjane Thiam, himself a non-banker, to be Credit Suisse's CEO. Thiam did his best to cut costs and attempt to root out practices allegedly perpetuated by the chairman, like waiving margin loans to the Qatari Royal Family (something Rohner's friends deny). Thiam hired compliance managers, who discovered that Credit Suisse was sponsoring the Zurich Film Festival, founded by Rohner's partner, and that he was giving a space in Credit Suisse's prized Zurich car park to a friend. Thiam was subsequently invited to Rohner's birthday party, which included a Black performer with a broom. The WSJ says Thiam felt it was a tacit, racist, message: he was there to clean-up for the chairman.
In Rohner, the impression is of a man out of depth and out of touch. When costs were being cut in 2019, Rohner allegedly decided to fly the supervisor and non-executive boards to New York to celebrate the restructuring. COO, Pierre-Olivier Bouée tried to protest against the trip, which went ahead anyway. The non-banking board members were treated to perks including invitations to horse racing on snow in St. Moritz and leadership sessions with brand ambassador Roger Federer.
Rohner, who is now on the board of GlaxoSmithKline, denies all the charges levelled at him. He says the bank was fine before he left, that capital was strong, that liquidity was strong too, that businesses were "all performing and were profitable," and that Credit Suisse was on a good path up until his departure.
Major shareholders disagree. "The chairman and other board members did not have the right skill set,” says one. “The chairman’s track record was atrocious,” says another. Current UBS CEO Sergio Ermotti may concur: Ermotti said last week that negligent senior bankers need higher sanctions and that Credit Suisse's collapse was due to, "repeated risk management and operational failures.” Rohner bears the ultimate responsibility for that.
Separately, it may not only be bonuses that are bad this year. The Financial Times reports that KPMG has also decided to do away with salary increases for its 12,000 staff in the UK, unless they're graduates. The Big Four firm's overall pay freeze is the result of “market uncertainty” and missed revenue targets. Bank, which are in a similar situation, may get ideas.
Santander executive chair Ana Botín thinks removing the UK banking bonus cap is a fine idea. “I think that [would allow] a better alignment with shareholders, so it would be positive, of course.” (Financial Times)
Bankers in Hong Kong have nothing to do and are taking holidays. One senior investment banker traveled overland from the Kyrgyzstan/China border to Turkey with his son on a $40-a-day budget as part of a month-long break. Another spent four weeks trekking in the fjords of Norway and the mountains of Canada on two separate vacations this year. A third took her family hiking in Italy and the Swiss Alps. Others took lengthy sojourns in New Zealand, Croatia and southern France. (Bloomberg)
PWC cut 2% of its staff in Canada and they're complaining that they got the "bare minimum" in severance. (Globe and Mail)
Sam Bankman Fried has been trading mackerel for haircuts in prison. (WSJ)
25 year-old Columbia graduate living on crypto trading profits from a few years ago. “There’s always going to be good days and bad days. I’ve seen both, but what other industry in the world can open me up to everything life has to offer?” (Bloomberg)
Passive aggression has proliferated with remote working. Hastily written messages don’t lend themselves to nuances of inflection. What might sound playful or helpful when spoken in person may well read as sarcastic or resentful when read on a screen. (Economist)
Ex-Goldman partner Margarget Anadu is still one of the most powerful people in New York. “Her superpower is being able to connect with virtually anyone and understand what makes them tick.” (New York Times)
Buy Joan Didion's desk for $60k. (Financial Times)
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