Ethos calls on shareholders to support the two resolutions which were co-filed with Swiss pension funds. Ethos recommends opposing the votes on the 2020 and 2021 discharge, on all compensation requests as well as the (re-)election of two directors.
Ethos has published its voting recommendations for the Annual General Meeting of Credit Suisse to be held on 29 April. Ethos calls on shareholders to support the two shareholder resolutions which were co-filed together with several Swiss pension funds. The first resolution (item 8 of the agenda) calls for a special audit of the bank to be carried out in connection with the Greensill and “Suisse Secrets” cases. This includes ensuring that the answers provided by Credit Suisse to Ethos' questions on these two cases are correct and comprehensive. Moreover, and contrary to what other proxy advisors seem to argue, the independent expert responsible for carrying out this special audit will be bound by trade secrecy (art. 697e of the Swiss Code of Obligations) so that his work would in no way interfere with the current process of recovering Greensill funds.
For Ethos and the seven pension funds which have co-filed this shareholder resolution, the conduct of a special audit would contribute to restore investor confidence in the bank. Ethos also stresses that a special audit would be more independent than the investigation commissioned by the board of directors from the law firm Walder Wyss and the audit firm Deloitte, knowing that the latter is also the adviser of the bank for the remuneration of its governing bodies. This mandate therefore seems incompatible with the investigation of the Greensill case.
The second resolution (item 9) concerns the bank's climate policy. In this case, it is a question of amending the articles of association of the bank so that it improves the transparency of its reporting on climate risks and reduces its financing of companies active in fossil fuels. This statutory change is essential to ensure that the bank is more transparent about meeting its climate objectives. The requested statutory change is also fully compatible with the future obligation of companies listed in Switzerland to prepare a sustainability report and submit it to a shareholder vote.
In addition, Ethos recommends voting against the discharge of the governing bodies for the years 2020 and 2021. While the bank has decided to exclude the Greensill case from these two votes, which Ethos welcomes, it still faces numerous court cases and new facts have come to light over the past two years. Consequently, Ethos considers that shareholders must preserve their legal rights in relation to the activities and facts revealed in 2020 and 2021. It should be recalled that these discharges would clear current and former members of the board of directors and executive management.
Excessive variable remuneration
Ethos also recommends opposing all votes on remuneration. While the remuneration of the board members and the base salaries of the executive management are considered as excessive, Ethos also has concerns regarding the distribution of the variable remuneration pool. Indeed, almost a third of the pool of CHF 2.5 billion was paid out to only 3% of the beneficiaries, i.e., 1’432 people. Furthermore, the board of directors compensated part of the reduction in variable remuneration by granting retention payments for a total amount of CHF 395 million, of which CHF 179 million was distributed to 134 people. Ethos considers that potentially wrong incentives may drive some employees to take too much risk in order to maximize their variable remuneration.
Concerning the annual bonus of the executive management, even if it was greatly reduced following the Archegos and Greensill cases, Ethos considers that in view of the loss of CHF 1.65 billion recorded by the bank, no bonus at all should have been paid for 2021. In addition, Ethos considers as excessive the request to grant CHF 12.1 million to the new members of the executive management as a compensation for having left their previous employers, in particular since the bank has already granted more than CHF 8 million as replacement payments to new members of the executive management.
Finally, Ethos recommends voting against the re-election of Michael Klein and the election of Keyu Jin as board members. Michael Klein faces litigation in Delaware for not respecting its fiduciary duties towards investors of an entity listed in the United States. Keyu Jin made certain remarks during an interview with a newspaper in Switzerland that contradict Credit Suisse's commitment to human rights. Ethos considers that Credit Suisse needs directors who share the values of the bank in terms of respect for human rights and sustainability in order to restore the confidence of all stakeholders and avoid being confronted with new controversies in the future.
