Swiss bank UBS AG, under pressure at home to give up on hefty bonus schemes in the face of its poor performance, said on Monday it will introduce a more transparent pay system for top executives, reproted Reuters.
The bank, which is struggling in the subprime crisis and whose shares slumped to a new all-time low on Monday, also said UBS Chairman Peter Kurer, its CEO Marcel Rohner and other executive board members would not get any bonuses this year.
Starting from 2009 UBS top managers' bonuses will be blocked for at least three years instead of being paid immediately. Managers will receive variable compensation if UBS results warrant.
"UBS takes the shortfalls of its current incentive system seriously and is revising its variable compensation model for the 2009 fiscal year," the bank said in a statement.
"UBS is fully committed to taking its responsibilities seriously and correcting previous errors"
Bankers' pay at Switzerland's top banks UBS and Credit Suisse Group AG has been the subject of hot debate in the country and almost a thousand people took to the streets of Zurich on Saturday to protest against what they see as bankers' inflated salaries.
Some major European players like Deutsche Bank AG have already said they will cut bonuses this year.
UBS shares were down 4.4 percent at 1048 GMT at 13.88 Swiss francs, slightly underperforming that DJ Stoxx index of European banks, which was down 3.5 percent.
The stock had earlier dropped to a new historic law of 13.81 Swiss francs as pressure mounted over a U.S. tax fraud investigation and investors grew increasingly concerned about money outflows.
"The shares are coming under pressure because of the continuing U.S. tax probe," a Zurich-based trader said. "Also, customers are annoyed and people are worried that the bank won't be able to stem money outflows quick enough."
UBS said last week Raoul Weil, head of wealth management and a board member, would step aside after U.S. authorities charged him with conspiring to help rich Americans avoid paying taxes.
UBS shareholders will vote on the new pay scheme at an extraordinary shareholder meeting on November 27, which also has to approve a government-sponsored rescue package allowing UBS to offload the vast majority of its illiquid assets while getting a 6 billion Swiss franc cash injection from the state.
Pay will not be capped but the new system will make it practically impossible for UBS to pay out bonuses running to tens of millions while the company is losing money.
If it becomes apparent over time that the company's profits were unsustainable or an individual's performance was only short-lived, the manager's pay could be cut, or even reduced to zero.