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Fight over pay and profile torpedoed Andrea Orcel’s move to Santander

Ana Botín disagreed with former UBS banker’s Davos plans and €50m pay demands

Andrea Orcel
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Banco Santander withdrew its offer to hire Andrea Orcel following last-minute disagreements over the star banker’s public profile and the size of his pay package, according to people familiar with the clash.

The Spanish bank argued with the Italian-born Mr Orcel over whether he could attend the World Economic Forum in Davos this year, said two of the people.

In recent years, Ana Botín, executive chairman of Santander, has been the sole executive representing her bank at the elite gathering in the Swiss mountain resort. Mr Orcel had also been a regular fixture representing UBS, where he was head of the investment bank until September when his appointment as chief executive of Santander was announced.

Mr Orcel offered to attend in a low-key capacity and said he would not take part in any panels or television appearances, instead using the gathering as an opportunity to catch up with clients, one of the people said.

But Santander counselled against his participation given that he was still on six months of gardening leave at UBS, another person said, and Mr Orcel reluctantly agreed not to attend.

The disagreement over Davos coincided with a separate row over the size of a sign-on package worth tens of millions of euros, according to several other people familiar with the negotiations.

One of the people said the tone of the disputes added to a nagging sense of buyer’s remorse felt by Ms Botín in the months following the announcement that Santander had hired Mr Orcel as chief executive.

The way that Mr Orcel behaved during the two disputes fuelled concerns that his ambition would make it difficult for him to serve as Ms Botín’s de facto number two, one person said.

Santander said: “The reason we did not proceed with the appointment is exactly as we have always said — that the cost of proceeding was beyond what the board believed acceptable for a retail and commercial bank.”

Mr Orcel did not return calls for comment.

Last month, Ms Botín admitted to having rushed Mr Orcel’s appointment without having “all the details ironed out”.

Mr Orcel sparred with the Spanish bank over the size of a block of Santander shares he would receive upon joining the lender, which was being awarded to replace more than €50m of deferred compensation he was forfeiting by leaving UBS.

Ms Botín had initially hoped UBS would let Mr Orcel keep some of the deferred compensation, but the Swiss bank rejected that idea.

Mr Orcel agreed to take a reduction of about a fifth, but that still left Santander facing a bill of around €40m, the people added.

The Santander human resources team noted that UBS’s insistence that Mr Orcel work a full six months of gardening leave meant he would still be an employee when a large block of deferred UBS compensation — worth more than €10m — was due to vest, the people said.

The Spanish lender wanted him to subtract the €10m from the block of Santander shares.

Mr Orcel reluctantly agreed to a reduction, but countered that he too had found a discrepancy. Under the terms of his UBS plan, he would have received dividends and some interest on his shares and bonds totalling €4m. The block of Santander stock he was due to receive did not reflect this, and Mr Orcel thought it should.

The row over pay that helped torpedo Mr Orcel’s move to Santander came to a head in late December, while he was trekking to Machu Picchu, the archaeological ruin in southern Peru.

As Mr Orcel basked in the sunshine, back in Madrid his move to Santander was unravelling. Having agreed to a sign-on pay package worth tens of millions of euros, the Spanish bank’s directors had developed cold feet.

A few days later, Santander rescinded its job offer after concluding that the cost of hiring Mr Orcel would be “significantly above the board’s original expectations”.

The Madrid-based bank said it had decided it could not hand him such a large sign-on package due to the political environment in Spain, where the centre-left Socialist party governs with the anti-establishment party Podemos.

The dramatic U-turn has prompted Mr Orcel to consider taking legal action against the bank.

The tone of the negotiations between Mr Orcel and Santander executives is disputed. Mr Orcel did not threaten to walk away from the job offer — and did not see the reduction in pay as a deal-breaker — but he was clearly not happy about his treatment by the Spanish bank, said several of the people.

As tempers frayed, Ms Botín suggested they should take a break from negotiations. The best way of resolving things was in a face-to-face meeting between her and Mr Orcel in Madrid in early January, she said.

The break would turn out to be final. When a sun-tanned Mr Orcel turned up to the meeting on January 8, Ms Botín informed him that the bank was rescinding its job offer.

“We’ve been close. I think you’d have been great for Santander, but given the total repurchase compensation, we don’t feel comfortable we can show it to society,” a visibly nervous Ms Botín told Mr Orcel, according to one person briefed on the conversation.

A week later, Santander announced its decision to investors.

The deterioration of the relationship between Mr Orcel and Santander was swift. Last summer, Ms Botín was considering appointing a new group chief executive to implement a new strategic plan.

She engaged Russell Reynolds, the headhunter, to lead a search to replace incumbent José Antonio Álvarez.

But she eventually decided the best person to deliver the strategy was Mr Orcel, who had helped to write it. After Mr Orcel accepted, the negotiations turned to how Santander would compensate him for the deferred pay he was forfeiting by leaving UBS.

In mid-September, Santander sent Mr Orcel a letter signed by one of its directors, offering him the CEO job, according to two people who have seen the document. The letter outlined the arrangements for his deferred compensation.

The Spanish lender would replace UBS shares and bonds that Mr Orcel was forfeiting with Santander stock that would vest over the same period, up to a maximum of roughly €40m.

The cap would end up proving a major sticking point. Each time Santander asked Mr Orcel to subtract something — such as the €10m he was due to receive from UBS in March — he countered by saying he had already agreed to a substantial reduction.

Around the same time that Santander sent Mr Orcel his offer letter, Ms Botín phoned Axel Weber, the UBS chairman, who was chairing a meeting of the Swiss bank’s directors in Singapore.

She asked him if UBS was willing to bend the rules of its compensation plan, but German-born Mr Weber, a former president of Germany’s Bundesbank, was adamant that the Swiss lender would not budge.

On September 25, Santander announced Mr Orcel’s appointment. After going public, Ms Botín continued to lobby Mr Weber behind the scenes, but he remained firm.

“This decision was non-negotiable and we did not negotiate,” UBS said in a recent tweet.

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