The blunder with the star signing of Santander has left everyone with a red face. Andrea Orcel has lost his job on Tuesday after the Spanish bank reversed its decision to appoint the former UBS banker as the new CEO. However, the most intense flush of all corresponds to the president of Santander, Ana Botín.
Botín surprised the European financial sector last September by the poaching of Orcel to take charge of the giant of the retail banking. However, less than four months later, the group valued at 69,000 million euros has changed its mind and said on Tuesday that it had miscalculated the cost of compensating Orcel for its deferred payments from UBS.
There is no doubt that the 55-year-old banker is an expensive signing. The silver-haired Italian was UBS's main investment banker for more than six years. British regulations oblige banks to defer payment of senior executives for up to seven years. When leaving UBS, he risked leaving all that on the table. Any rival who wanted to attract him would have to compensate him.
Santander's board assumed that UBS would see Orcel's new employer as a valuable customer instead of a competitor, and allow him to keep part of his deferred payment. But CEO Sergio Ermotti remained firm. Instead of paying and causing a possible scandal in Spain, Botín backed off.
The extent of the damage depends on what happens next. Orcel presumably can raise a strong legal claim against Santander. Forcing Botin to pay a CEO that he no longer wants to hire would be potentially more embarrassing. Orcel will resist humiliating one of his best clients. UBS can conclude that, since your former executive is not taking on another job, you are entitled to part of your deferred payment.
It is the kind of delicate multiparty negotiation in which Orcel, as a banker who closed agreements, has stood out for a long time. Both he and UBS will be somewhat humiliated by the saga. Whatever the result, however, Botín remains as something reckless and naive.