Monthly Archive: July 2014

How to Rob a Bank (or a Whole Country), Part II

Besides “liar’s loans” there are more tricky tactics that lead to an excavation of money from banks. In this engaging interview, Andrew S. from Texas, a bank employee with a university degree who came to Switzerland some 15 years ago, reveals the dramatic changes within UBS and the scams applied by American management – with very little public notice. Probably a more fitting title for this interview might have been “How to Destroy the Value of a Company”.

Editor: Andrew S., thank you for taking this time for an interview. I understand that you have worked in many countries and for many firms in the whole wide world. What were your impressions when arriving the first time to Switzerland?

Andrew S.:

“I arrived here in October 1998 and I was really amazed. After three months, at the end of December I went home to the U.S., and I have a very big family, they asked me “so how do you like it?” I said “guys, you won’t believe this! We take full hour lunches, the employee canteen is a real restaurant that serves fresh hot food on real plates with real silverware – not eating a slice of cold pizza with one hand while working with the other hand!” I was amazed of what is available to the employees: space to work in, ergonomically designed chairs for the comfort and safety of the employees – not tiny cubicles with tiny little desks. There was no such thing as a one-person job. Every function had a team taking care of it. So if somebody gets sick and another person is on vacation, there are still members of the team to take care of the business. In the U.S. I was alone in charge of so many different things, and whenever I took a tiny little vacation and came back, I had two weeks worth of work waiting for me to catch up within a couple of days so the vacation is screwed right there. Nobody else was there to jump in.”

Editor: Sounds very familiar, like today’s common practice. What else have you discovered when starting with your new job here in Switzerland?

Andrew S.:

“Compensation was tremendously higher than in the U.S. for the same function and every employee got either a 13th month salary or in my case at UBS they had a bonus system which really recognized every one every year. The compensation got to those people who actually did all the work. I remember one time there was an article in the papers about members of the board of directors getting eight million Francs bonus. I was with a bunch of Swiss colleagues and they were arguing about it. The talk was like “what do they do to deserve eight million?” I said “guys, eight million is pocket change for American management. Where I worked in the U.S., those guys get hundreds of millions. Eight million is like a birthday party or something. These guys won’t take anything under a hundred millions. So don’t complain about eight million, that’s nothing.” They stared at me with blank faces. They were sure I was exaggerating or lying. Who would get that kind of compensation just for being upper management? Well, Jack Welch walked away from GE in 2001 with almost $300 million in equity profits and a pension worth $96 million; or nine million a year for the rest of his life. After he retired from General Electric it wasn’t until a divorce settlement forced the disclosure of his retirement benefits package that anyone took any notice. Since then, multi-million dollar severance and other separation packages, commonly referred to as ‘walk-away’ packages, have become so commonplace for CEOs that when HP fired Leo Apotheker with a $12 million guaranteed cash payment it barely registered. And these are, again, just their departing packages on top of the many millions they were getting every year, while in the mean time these so-called managers were laying off employees; just throwing people on the street, destroying the livelihood of thousands of families – not just persons.”

“And I started using the term “modern slavery”, because in the old days in the U.S. slaves were beaten to force them to work. These days nobody beats you, but they do something much worse to you, they threaten you with your family’s livelihood: housing, food, healthcare, and happiness all tied to your job. And if you don’t slave away for them, you are out on the street. You are just a number, it doesn’t take much for a top manager to throw a bunch of people out on the street. In the U.S. it is literally slavery: you are getting paid a minimum to survive on while you are doing all the work. It is the masses honing that big machine and those guys are standing in their ivory towers just watching and every now and then they sign a piece of paper saying “kick out five or ten thousand people on the street, we don’t need them. Our bonuses are getting below a hundred million.” It is horrible and when I looked around in the beginning when I came to Switzerland I thought I was in paradise. It was hard to believe all these wonderful things happening, as far as the pay, the comfort, the nature of work, the openness of management. You could walk up to management and chat with them or ask them something almost any time.”

Editor: So, in the beginning, how was management organised and what was their attitude towards staff here in Switzerland? How would you describe the climate at the time?

Andrew S.:

“The organisational climate at the time was fantastic. The ranks were organized in a way which resembled a military hierarchy, which means there was a person called the “team leader” in your work area you could just run to and say, “hey boss, I have a situation!”, and he was right there with you. You had a problem, you needed a lead, you needed help or escalation – he was right there to provide you with whatever you needed. Management was always among the “troops”. I remember this one Dr. P. who was unbelievable. I have never worked in my entire life with a manager like him – and I have worked in many countries in the world – he was always literally sleeves rolled-up. If there was a problem, you could expect him within minutes right there. Not to investigate, not to push for the problem to be solved, but to say “guys, do you have it under control or do you need resources?”. I remember one instance in which I was directly involved; we had a major disaster when our entire environment crashed. I told him it is a hardware problem. He got on the phone and flew two hardware engineers form London to Zurich, right on the spot. Within hours they were here and replaced specialized hardware. That is the kind of manager that you look up to and respect – he was a managing director. But because he was at the employees’ side, they demoted him. American top management demoted him later because he kept pushing for employee rights.”

“Anyway, what I was never familiar with in any other country was the concept of “Apéro” (aperitif): once or twice a week some team celebrating – whether they finished a project, or successfully closed a big case, or simply somebody’s birthday or graduation. A bunch of people getting together with beer, wine, juices, snacks, food at the end of the day and celebrating – having a good time in the office. If you get caught in the U.S. with a bottle of beer in the office you are thrown out! No spontaneously organized gatherings in the office. Only if there is something big like Christmas…”

Editor: The manager you are describing, Dr. P. is quite different from the type of managers we see around today. What has changed and when?

Andrew S.:

“Everything has changed. I was proud to say that I work for UBS. When the subject came up, whether in the supermarket, or while commuting, or in a bar downtown, I said with a proud voice that I work for UBS. I was happy to work for UBS. I woke up happily looking forward to go to work. Even my wife was amazed saying she hadn’t met anyone who was so happy to go to work. “You really love your job that much?” I said “absolutely!”. There was no such concept like stress. We always had lots of work and we worked hard, but we had no stress – even when we had a major disaster. We had all the resources we needed. If not they were provided immediately, whether in the form of workforce, hardware, knowledge, money, equipment. And if we had to work past seven p.m. management would order in dinner for us from food delivery companies. Chinese, pizza, sushi, burgers; we ordered whatever we wanted from the menu. And of course pay was much higher if you had to work overtime. We were very well paid, and still UBS was making billions in profit per year. So my point here is that even thought they paid their employees handsomely, looked after them well, had many employees in teams, and layoffs were hardly known, they still made a lot of profit. When times were bad the company tightened the belt and they went through it with their existing employees. When things were good then they are back in good times together. So they didn’t watch the bottom line and as soon as it goes one or two percent down, fire ten thousand people so top management can secure their bonuses. “

Editor: So you are saying that management was less focused on quarterly reporting and the movement in share price that comes with it, but took better responsibility for the bigger picture of a company. What were the reasons for change?

Andrew S.:

“See, this is the thing, they treated the employees so well that the employees never stopped to do their duty. They always worked above and beyond what they needed to do. I can tell because I was one of them. I always checked and double checked if systems were healthy. I never ever left when there was the tiniest problem, and I fixed it regardless whether it was Friday evening or I had to go to a party. I know that most of employees, if not all, made sure everything was right before they left the office. The thinking was “the company is taking good care of me, so I will take care of it no matter what!”. Since management was doing it the right way and they were honest not only to the employees, but also to their customers – which is the most important element here in this picture: that is what pays our bills, what pays our salaries, the income of the bank, the employees and the shareholders. Management was not obsessed with increasing their bonuses to an almost criminal level. They were getting very good salaries and decent bonuses. Sure, not like the American management bonuses, but a few hundred thousand, a few million – plenty of money to live on very happily and even get rich.”

Editor: The picture you are presenting here makes a strong case. Indeed, evidence supports the fact that firms that take care of their customers and employees also deliver value to their owners (Hawawini and Viallet 2011, p. 3). Annual surveys (Edmans, 2008) clearly indicate that the ability of firms to crate value for their shareholders is related to the way they treat their customers, employees, and community. What resulted from the change you are describing a) for management b) for employees c) for shareholders?

Andrew S.:

The most disturbing factor in the picture of what is different in UBS between 1998 (the early 2000) and today is the top management obsession to an almost criminal level with huge bonuses, which made today’s management like Brady Dougan from CS brake so many laws to make that massive multi-million pay-packages happen. When I learned in 2004 that the bank is having a major overhaul on their top management and that top management is going to be American, I thought “oh no, good lord please tell me you are kidding me! That cannot be true!”. My colleagues asked me why, and I said “let me tell you about American management. So many companies have these practices of hiring mostly part time employees because they get no benefits so top management can keep their massive pay packages. And they have these criminal practices like secretly buying life insurance on their employees so when the employee dies, the company gets the life insurance. You guys are screwed with American management!” They asked me how? I said:

  1. “For one, they are going to make the changes where the valuation of the company is magically going through the roof and the share prices are going to sky rocket, while they can cash in their options and get a fortune out of that.
  2. To do that, they have to save money to show more profit. Where is that money coming from? From your pocket! They are going to cut overtime pay, on-call pay, they are going to take away your 13th month salaries. And these are just the beginning.
  3. Because they are going to cut every penny they can because they know it is going to flow in their own pockets.
  4. Then they will get involved into criminal activities.
  5. And then the bank is screwed.”

“Again my Swiss colleagues thought that I was crazy. Of course I was speculating and guessing, but that was what I have seen in the U.S., my experience with American management. In a bigger context, it can be extrapolated to the later “subprime crises”, a scam created in the U.S. and then U.S. debt distributed all over the world. American bosses having a hand in it and profiting from the losses of the European and Asian banks and companies, creating a global economic recession.”

“In a small way you can compare this picture of a company and their employees, their profitability and health to a human body. If you take care of various aspects of your body, then overall you are healthy and strong. And the employees make the body of a company. I don’t even want to go as far as saying management is the head. They are just a bunch of people who got expensive degrees from Harvard or Yale and got appointed in top positions because of that, their connections, and their father’s connections; and now all they are doing is pushing this company, squeezing the hell out of it to get the most bonus they could possibly get. Once they leave the company they made such a big package that thousands of people could live on. Upon leaving the company, having already made tens or hundreds of millions, they receive yet another massive pay package called the golden parachute, the good-bye party package. It is way beyond insanity. Criminal insanity might begin to describe it in my opinion. The last thing we have seen about UBS management is that they made three billion profit. Surprise, surprise, that year they took four billion in bonuses. So the entire company, sixty thousand people worldwide contributed with more than half of their work to make bonus for top management. And at the same time top management throws those lies about taking care of shareholders. Those top managers dropped the dividends from CHF 2.20 down to 0.20 per share, and that is after causing the share price to plummet from CHF 80.- a share down to 16.-. How are they taking care of their shareholders?”

Editor: What is your assessment of today’s situation in Switzerland generally and what can we expect for the future?

Andrew S.:

“If you have a look on life in the U.S. you see a whole collection of outrageous components. For example, their jobs, the corporate greed, their taxes, the air quality, the food quality, everything about their entire existence is outrageous. Top management gets almost everything, employees get the bare minimum and then the government comes in and demands a big chunk of that. The government – that is a totally sad joke. They call it democracy? It is completely controlled by the big money. Only the illiterate, naïve, or ignorant buy this democracy scam. If mainly Europe and Asia don’t stop taking in American top managers with American corporate mentality, American tactics, and criminal corporate activities then this will be just the tip of the iceberg towards economic destruction. It is a modern form of colonialism and the scary part is not only that it is spreading like cancer but also that Europe and Asia are taking it with open arms. They are not just accepting the concept, they are taking it like it is out of style. “Use thousands of people to make money for me!” Individualism and the American nightmare. One thing I have realized about big American manufacturers having their operations moved to foreign countries like Mexico, Eastern Europe, and Third World countries where labour is very cheap, is that in the U.S. this practice leaves behind people without jobs or people with very low wages. Think about the city of Detroit, once the crown jewel of the automobile manufacturing industry, now broke while the automobile companies still thrive and their top managers get their huge pay packages. And manufacturing is just an example. Look at electronics. Or every corporation has customer support. If you are going to outsource thousands of jobs, that automatically tells you that these are missing, which in turn means that you are taking billions out of a country’s economy. Eventually it will catch up, but it is a practice to serve only a few dozen corporate aliens who want to make millions for themselves. They are not even taking care of shareholders – forget that myth! That story is dead! Again, that cancer originated in the U.S. and it is running all over the world and only the super rich benefit.”

Editor: Thank you, Andrew S. for this moving interview and let us hope that some people wake up from your call.