The Spanish bank backtracked for the 35 million UBS bonus but according to a Madrid judge the contract was valid. The group announces an appeal
It is a maxi compensation of 68 million euros that decided by the court of first instance of Madrid against Banco Santander who will have to indemnify the Italian banker Andrea Orcel, today at the helm of Unicredit, for the failure to be appointed as CEO of the group. A ‘heavy’ sentence against which Santander intends to appeal, according to what banking sources report to the Europa Press agency.
Orcel had sued Banco Santander two years ago for the ‘backtracking’ of his appointment, announced by the group in September 2018 but followed four months later by a rethinking of the board of directors which found the payment of the deferred bonus of 35 million untenable. the Italian banker had matured at UBS, a bank of which he was a senior manager and which he left to sign with the Spaniards. Orcel’s initial request was € 112 million, reduced to € 76 million after his appointment to UniCredit last April.
The Italian banker asked for the contract of 24 September 2018 to be declared valid and Santander to be sentenced to compensate it with a 17 million constitution bonus, 35 million for taking long-term incentives, 10 million for moral and reputational damages and amount corresponding to two years of the salary he would have received from Santander. For Santander, however, the offer letter sent to Orcel was not a ‘valid contract’, as it had not been approved by the board of directors or the shareholders’ meeting, while the appointment was still subject to the European Central Bank’s suitability assessment.
In his sentence, however, the magistrate Javier Sánchez Beltrán espoused Orcel’s thesis and sentenced Santander to pay compensation of 68 million, judging it “evident” that the offer letter of 24 September 2018 “constitutes a valid and perfect contract”, since it contains the offer of one party, the acceptance of the other, the consequent consent of both on the management of the employment relationship. The judge also used the statements made by Santander chief Ana Botín on her Twitter account for her decision. “Andrea Orcel has been appointed CEO of the Santander Group with effect from the beginning of 2019 (…). It is a source of great satisfaction that Andrea Orcel joins our company as CEO of the group”, tweeted the president. of the group on 25 September 2018. But Botìn had also praised, in an interview with ‘Bloomberg’ in October 2018, the experience that Orcel would bring to the group while in a promotional video the “changes at the top” were announced with the appointment of the “new managing director of Banco Santander”.
According to the judge, the board of directors actually approved the contract, since from the minutes of the meeting of 25 September 2018 it would appear that the economic offer sent to Orcel had the approval of the Remuneration Committee and that the Board of Directors would have resolved unanimously to appoint him by co-optation as a member of the Board and CEO of the bank, an appointment that should have been ratified at the first general meeting of shareholders and then become effective after the authorization of the ECB. Moreover, the same Botìn in September 2018 would have informed the nomination committee that both the ECB and the Bank of Spain had informally communicated that they had no objections to the appointment of the Italian banker.
Underlining that the offer letter does not contain any reference to the approval of the appointment by the shareholders’ meeting, the judge thus declared the contract of 24 September 2018 valid and finalized, judging the bank’s reversal “unilateral and unjustified”.