March 2, 2020 / 7:19 PM / a month ago

Breakingviews - Exclusive: UBS CEO tips Swiss to better governance

Swiss bank UBS CEO Sergio Ermotti addresses a news conference in Zurich, Switzerland February 20, 2020. REUTERS/Arnd Wiegmann

ZURICH (Reuters Breakingviews) - The reward for successful American chief executives who retire is that they get to become chairman of the board. That’s what the bosses of Walt Disney and Mastercard did just last week. It may be nice for CEOs who don’t want to leave. But it can be a real pain for their successors. In that respect, Sergio Ermotti, who has run UBS since after the financial crisis, is leaving Switzerland’s largest bank on a high note. Rather than hang around the basket for a chance to succeed Axel Weber atop the UBS board, he will become the chairman of Swiss Re, the $31 billion reinsurer, Reuters and Breakingviews have learned.

First, Swiss Re will have to wait for the Italian-Swiss to finish the job at UBS. He has promised to stay on until November, overlapping for a few months with Ralph Hamers, who currently leads Dutch bank ING, and arrives in September. That’s about as smooth a handover as shareholders could ever have anticipated. As a result, Ermotti won’t effectively replace Walter Kielholz as Swiss Re chairman until 2021. Given that Kielholz has been on the board since 1998, stuck around after he retired as CEO in 2002 and held the post of chairman since 2009, the change can’t come soon enough.

The argument for allowing CEOs to step up to the chair is that it provides continuity. And, anyway, so long as a board has a sufficient number of strong independent members, the strategy will be unencumbered by having the former boss at the head of the table. In some cases, that may be true, but in most it is better to just let the new guy or gal get on with running the company, encouraging new ideas, pursuing new investments and promoting previously overlooked executives. Switzerland’s financial community is clubby enough. Better just to let UBS, Swiss Re – and Ermotti and Hamers – write their own next chapters in peace. 

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