Swiss banks are probably not accustomed to playing practical jokes on 1 April, but the business community could have been forgiven for thinking that UBS was engaging in some April Fool’s Day shenanigans when it announced that its general counsel, Peter Kurer, would be the new chairman.
Such a move does not happen very often and, according to a raft of City commentators, neither should it. Indeed, if proof were needed of the suspicion in which lawyers are held by large parts of the business community, Kurer’s appointment provided it.
“UBS is in such a mess that it needs a strong new chairman,” wrote Hugo Dixon, editor of the influential website Breakingviews. “Peter Kurer is not obviously the right man for the job. The last lawyer to chair a bank was none other than Citi’s Chuck Prince — and that was a disaster.”
Kurer, who joined UBS in 2001 and was appointed to the group executive board the following year, even incurred the public criticism of his former colleague, ex-chief executive Luqman Arnold. In an open letter,
But it is Kurer’s skills and experience that UBS hopes it will be able to draw on to steady it through some pretty stormy weather. The bank has recently felt the effects of the worldwide credit crunch, announcing writedowns of SFR19bn (£9.5bn) and reporting net losses of around SFR12bn (£6bn).
The bank itself sets the appointment in the context of an extensive process already underway aimed at identifying the root causes of and lessons to be learned from its spiralling subprime losses, which so far make UBS the worst-hit bank in Europe.
The bank’s board is undertaking what amounts to a root-and-branch review of how it functions, including governance, risk management, monitoring and control systems.
Helmut Panke, chairman of the nominating committee of the UBS board, said Kurer’s experience of managing a large complex compliance function, as well as his experience on boards of other financial institutions, would prove valuable.
At one level, the logic of placing the general counsel at the helm of a rocky ship seems obvious. “It is a classic defence mechanism to install your general counsel in a more senior position, because they are very experienced at dealing with difficult times,” says George Forbes, assistant internationalgeneral counsel at Bank of New York Mellon.
Tony Wales, general counsel of AOL Europe and president of the Association of Corporate Counsel Europe, agrees. “Shareholders will be looking for a more cautious approach when there have been write-offs, and this sends a good signal. A general counsel will have been supervising the compliance function and will be good at steadying the ship.”
Private practice lawyers that have encountered Kurer, who before his career at UBS was one of
Simmons & Simmons financial litigation partner Jonathan Kelly comments: “Kurer is outstanding in terms of the key attributes you would associate with a senior counsel — of being measured, insightful and a safe pair of hands, but he will undoubtedly also bring a broader business perspective and acumen.”
However, it is exactly the caution that general counsel are thought to bring that makes some question whether they make viable long-term chairs or chief executives.
“They cannot stand still — they have to be entrepreneurial,” says KPMG associate general counsel Chris Arnull. “Their whole business is about taking risks, whereas compliance is often about saying ‘you cannot do this’.”
Kurer’s performance will be closely watched and will no doubt provide evidence of how well a general counsel adapts to a wider-ranging role such as chairman. One point that sceptics in the business community arguably fail to take account of is the breadth of experience gained from working as a general counsel, as opposed to simply a financial lawyer.
“The real advantage that a true general counsel has is that they see and touch lots of parts of the business; more so than their business colleagues dealing with just one particular part of the business,” says Forbes. “They have a very broad overview of what is going on across the board, which is suitable for the role of chairman.”
Giles Pugh, former consultant to in-house legal departments at Hildebrandt and now marketing director of Salans, says: “As a general counsel, with responsibility for risk, you are exposed to the whole business from top to bottom – you need to understand what is happening on deals and the exposure of each part of the business.”
Nevertheless, it remains highly unusual for the general counsel to be given the job of chairman or chief executive, with the appointment usually going to a senior executive such as the chief operating officer or finance director, or to an outsider with a proven track record at another company. One of the rare examples in recent years has been Jeffrey Kindler at Pfizer, who in 2006 was promoted from general counsel to chief executive, taking on the chairman’s role later the same year.
Less unusual, though still relatively rare, are examples of top executives with a legal career on their CV. Chuck Prince, Citi’s recently-departed chief executive and chairman, began his career as an attorney at US Steel Corp, but held the posts of chief administrative officer and chief operating officer before taking the helm at Citi.
Given the string of banker heads of major financial institutions that have lost their jobs in the wake of credit-crunch related losses, it is ironic that Prince’s legal background should be used against him. Many neutral observers would argue that Citi came unstuck because Prince — who uttered the now infamous “we’re still dancing” comment at the height of the credit boom last summer — acted too much like a banker and not enough like a lawyer.
Meanwhile, Reuters chief executive Tom Glocer held the posts of deputy general counsel of Reuters America and general counsel of Reuters America Holdings, then spent three years as chief executive of the company’s Latin American arm before being appointed
to the top job.
In contrast to Prince’s widely criticisedtenure at Citi, Glocer, one of the driving forces behind Reuters’ ambitious tie-up with Thomson, has been lauded for successfully turning around a drifting media giant.
In the
What these former in-house lawyers have in common is that they made an early move into a wider business role. “There are a number of people with legal backgrounds, but they have moved to the business side earlier in their careers,” says
However Kurer fares in his new role, and even though his scheduled confirmation by shareholder next week (23 April) cannot yet be taken as a given, there is no doubt that the morale of Europe’s in-house legal community will be boosted by further evidence that career
progression need not necessarily end at general counsel. “It is good news for lawyers — it gives us an added profile,” says Arnull. “It is not as if it was a small organisation — it is a huge appointment in a huge place.”
Still, many senior in-house lawyers may want to see how Kurer fares in his new role before they start to eye up the chairman’s office.