Red Faces as Top Bankers Get Their Math Wrong--Overheard

By Paul J. Davies 

Hiring chief executives is complicated, but rarely does it go so wrong that an appointment is canceled months after the new boss has publicly accepted and disappeared on gardening leave.

This is what happened at Europe's second-biggest bank Banco Santander, when it hired Andrea Orcel, formerly head of UBS's investment bank. Santander misjudged the cost of paying deferred compensation from UBS that Mr. Orcel would lose, which turned out to be more than $57 million.

It would take nearly five years for Ana Botín, the executive chairman who actually runs the Spanish retail bank, to earn that in fixed and variable pay and pension contributions at 2017's level. She also has long-term share awards for the past six years, but they are worth at most EUR8.5 million ($9.7 million) at today's share price. Her current CEO's pay is much lower.

Balking at such a sum to hire Mr. Orcel is understandable, but only realizing the cost now is an astounding error. Santander should be deeply embarrassed.

Write to Paul J. Davies at [e-mail]

(END) Dow Jones Newswires

January 16, 2019 09:20 ET (14:20 GMT)

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