Business 10/12/2021

Ana Botín defeated: Santander to pay Andrea Orcel €68m

Italian was to be appointed CEO but the bank reversed its decision before he took office

3 min
Andrea Orcel, Ana Botín and José Antonio Álvarez during the presentation of the former's signing.

A resounding defeat for Ana Botín, the president of Banco Santander, in the case that confronted her with Andrea Orcel. Santander will have to pay €68m over the botched signing of Orcel, as Madrid Court no 46 has decided. The bank has already said it will appeal.

Santander announced just over three years ago, in September 2018, that the Italian would be its new CEO. Four months later, in January 2019, the bank backed down and decided not to sign Orcel despite the public commitment that had been announced, with a photo of Orcel alongside Botín. The Italian had not yet taken up the position because, to avoid the risks of disclosure of business secrets, at this level of banking there is usually a transition period between moving from one entity to another. Orcel, who came from the Swiss bank UBS, had already left UBS and was waiting to join Santander.

Botín's argument for rejecting the Italian banker was that his signing was "an unacceptable cost". Orcel was entitled to collect €50m from UBS in concept of bonuses that had been accumulating during his time at that bank, provided he did not go to work for its competition. Botín said that UBS could not consider Santander a competitor, since UBS is an investment bank and Santander i a commercial bank. But this is not the way it worked out, and unless Santander paid the bonus, Orcel would lose out on €50m. In the end, Santander backed out, leaving Orcel unemployed.

The case has badly damaged Santander's reputation, the third largest bank in Europe by stock market value. The entity was forced to recover José Antonio Álvarez, the outgoing CEO, to stay in the position – which, by the way, he still holds today.

There is a widespread feeling in the sector that an institution like Santander does not make unintentional mistakes like this and that, in reality, the rectification was more of a personal matter between Botín and Orcel. The Italian banker himself has defended this point of view. In Europe, bank presidents do not have executive power, and in fact the European Central Bank requires it – although Spain is turning a blind eye to the practice at the moment. The ECB calls for the president to have a more institutional role and for executive power to be vested in the CEO, so that each bank has a two-tier executive that acts as a counterbalance. But Santander is a Spanish entity, governed by its president, Ana Botín. Orcel came from a different tradition, and the possibility of stepping on the president's turf could have been a trigger for the final decision.

The trial

Andrea Orcel, who has been CEO of Unicredit since April, took the case to court. He initially asked for €112m in compensation, which he later reduced to €76m: €17m for the joining bonus, €29m for the part of the deferred bonus he was to receive at UBS, €20m corresponding to the salary he was to receive at Santander over the following two years and €10m for reputational damage. In the end, the judge has accepted that he receive €68m in compensation.

Santander argued that the offer letter it sent to Orcel, which the Italian showed at the trial, was not a valid contract because neither the board of directors nor the shareholders' meeting had approved it, and the appointment had yet to receive the green light from the ECB.

Among the witnesses who testified at the trial were both Botín and Orcel, but also the president of UBS, Axel Weber, or the former director of human resources at Santander, Roberto di Bernadini.

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