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How spy scandals and grudges led to Thiam's Credit Suisse execution

 

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Tidjane Thiam, former CEO of Credit Suisse. Photo: REUTERS/Jason Lee/File Photo

Tidjane Thiam, former CEO of Credit Suisse. Photo: REUTERS/Jason Lee/File Photo

REUTERS

Tidjane Thiam, former CEO of Credit Suisse. Photo: REUTERS/Jason Lee/File Photo

It took Credit Suisse Group AG's chairman 19 meetings to woo Tidjane Thiam and one board meeting to say goodbye.

In a matter of hours on Thursday, the Swiss chairman of a Swiss bank put the Swiss back in charge, ousting the French-educated native of the Ivory Coast.

The boardroom showdown in Zurich capped an extraordinary run of public scandal and private feuding at the highest levels of the Swiss bank.

It leaves new leader, Thomas Gottstein, to broker peace among executives and restive stockholders - some of whom are still calling for chairman Urs Rohner to follow Thiam out the door.

In the end, the bizarre disclosures - executives spied upon, grudges among top managers - proved too much for the bank's board and an establishment that prizes discretion.

A stock price that had declined by about 50pc during his tenure didn't help either.

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New CEO Thomas Gottstein. Photo: REUTERS/Arnd Wiegmann

New CEO Thomas Gottstein. Photo: REUTERS/Arnd Wiegmann

REUTERS

"We saw deterioration in terms of trust, reputation and credibility among all our stakeholders," Rohner said.

He said the bank's reputation was particularly damaged in Switzerland, which accounts for about 40pc of the bank's pre-tax income.

The swift end to Thiam's tenure couldn't be more at odds with his auspicious start at the bank. Rohner spent months courting Thiam before the star insurance executive joined in 2015.

Thiam came with glowing credentials. Under his watch, shares of Prudential Plc had tripled and Swiss newspaper 'Blick' lauded him as the "Obama of Credit Suisse" shortly before he joined the firm. With Rohner's backing, Thiam overhauled a bank that had been battered by a volatile trading business in the years following the financial crisis.

In the early days, Thiam and Rohner projected a united front. Rohner, a Swiss lawyer, relied on his new hire to push through a deep restructuring that led to the loss of thousands of jobs and shrunk the bank's trading business.

But there were signs of trouble after a huge trading loss in 2015, prompting Thiam to publicly complain that he was blind-sided by his traders. Rohner took the position that Thiam should have seen it coming. Years later, a conflict between them brewed again over Thiam's dispute with ex-international wealth management head Iqbal Khan. Under Thiam, Khan enjoyed a steady rise.

The two men were so close that they became neighbours in the upscale Zurich suburb of Herrliberg. But their relationship soured as Khan's success grew and he assumed the role of "crown prince" in a possible CEO succession.

Tensions between the two men erupted in an altercation at a party at Thiam's house in January 2019, prompting Khan to complain to the bank's board. The next month, Khan was passed over for a promotion that elevated two of his colleagues to the executive committee.

And by July, the wealth-management star was quitting to join cross-town rival UBS Group AG.

What happened next sparked an international scandal.

One of Thiam's deputies, Pierre-Olivier Bouee, hired detectives to follow Khan - a development that became public after Khan confronted his pursuers in downtown Zurich. As the fallout from the scandal spread, a contractor who hired detectives for Credit Suisse took his own life, prompting a police investigation.

At a press conference in October, Rohner apologised to Khan and his family, while maintaining that the board fully backed Thiam.

Thiam was absolved of responsibility in an internal probe, with the board blaming his lieutenant Bouee for ordering the surveillance. Bouee had been a close confidante of Thiam's at three companies for more than a decade, yet his former mentor distanced himself.

Referring to his long-time colleague, Thiam said publicly that he wasn't "sure you can describe him as a friend".

Rohner was displeased by that statement, according to a person familiar with his thinking. The bank has struggled to contain the crisis ever since. In December, a second spying incident came to light, after it was reported that former HR head Peter Goerke had been followed.

This episode was a turning point for Rohner and it also unsettled Swiss regulators, who have launched their own inquiry into the culture at the top of the firm. Top shareholders including Harris Associates, Silchester International and Eminence Capital came to Thiam's defence after the revelations and said Rohner should go if he couldn't back Thiam.

Publicly, the chairman was on the defensive. Privately, he was lining up support from other shareholders, including Qatar's sovereign wealth fund and the world's biggest money manager, BlackRock Inc.

"The issues accelerated, probably more than we wanted in the last couple of days," said Rohner, who received unanimous backing from his directors.

After a dinner on Wednesday night, the board convened on Thursday for about eight hours of meetings in the make-or-break showdown.

The directors had already debated the spying and its consequences on several occasions, Rohner said.

So by the time they met on a crisp and sunny morning in Zurich, most of the issues had been prepared in advance and Rohner expedited the management change like any other board meeting.

By early evening, his staffers were already working on the announcement for Thiam's resignation.

Bloomberg

Irish Independent