Credit Suisse restructuring draws criticism from investors
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Credit Suisse recently halted several investment banking decisions. However, this move is already attracting criticism, with two investors and a proxy adviser saying there were concerns about the conflicts of interest of two directors.
Credit Suisse overhaul raises concerns
The recent decision to steer away from investment banking is being seen as a way for Credit Suisse to focus more on wealth management. However, investors have now raised concerns about how the decision to o this was made.
The overhaul was done through an effort by Credit Suisse chairman Axel Lehmann, board member Michael Klein, and other officials earlier this year. Towards October, Klein stepped down to work in a spin-off division known as CS First Boston. If regulatory approvals are realized, Klein will be the CEO of this division next year.
According to Ethos Foundation, Credit Suisse needs to prove that it did its due diligence before picking Klein as the head of the new CS First Boston. The CEO of Ethos, Vincent Kaufmann, added that there are concerns about whether the board conducted a proper recruiting process.
Roger Said from proxy adviser Actares has also aired concerns that Klein and Blythe Masters, a board member who helped in the restructuring, would benefit at the expense of Credit Suisse.
Regarding whether Klein and Masters could have influenced major decisions to favor their interests, Said noted a possible conflict of interest in the two cases. He added that the bank needed to demonstrate how it addressed the risk and become more transparent.
In October, Lehmann had said that the two directors needed to stay away from voting, adding that they would only be allowed to contribute on technicalities to help provide facts that would be used in decision-making. Lehmann added that these matters were well documented.
Not all investors are displeased
The two leading backers of Credit Suisse, Harris Associates and Saudi National Bank, have reaffirmed their support of Credit Suisse and commended the bank on how it handled governance while addressing criticism from investors.
Harris Associates has a stake of around 10% in the bank. It is among the investors supporting this decision and has backed the bank’s manner in addressing conflicts of interest.
The company’s deputy chairman, David Herro, also commended Credit Suisse, saying they had “properly dealt with situations where there have been conflicts.”
