By Jesús Aguado
MADRID (Reuters) - A Madrid court has ruled Santander (BME:SAN)'s offer letter to Andrea Orcel making him CEO was a binding contract but reduced the compensation for the Italian banker by 8 million euros ($8.6 million) to up to 43.4 million euros, a court document showed.
In one of the banking industry' biggest rows over pay, Orcel and Santander ended up in court after Spain's biggest bank dropped plans to make the former UBS investment banker its chief executive in January 2019.
The latest ruling, dated Jan. 20, comes after Santander appealed against a lower court order a year ago to pay him 51.4 million euros and contested that Orcel's job offer letter was a contract.
The court had initially awarded him compensation of 67.8 million euros before reducing it as the judge later clarified that Orcel was not entitled to tax equalisation as part of a buyout clause.
In the new ruling, the judges cut to 2 million euros from 10 million the amount granted to Orcel for moral and reputational damages but left the remaining compensation unchanged.
"We consider it more proportionate to set the compensation at the amount of 2 million euros (...) after analysing the economic interests, remuneration, risks, responsibilities, expenses, and standard of living of Orcel," the court said in a 30-page document first seen by Reuters.
The court also took into account that Orcel was unemployed for a relatively long period of time.
SANTANDER WILL APPEAL
Santander welcomed the court's decision to "significantly" reduce the compensation, but said it would file an appeal before Spain's Supreme Court, delaying any final outcome further.
Orcel said in an emailed statement he was pleased that "today's ruling vindicates truth and justice by proving incontrovertibly for the second time in a court of law that there was a fundamental breach of contract by Santander as we have always argued."
The compensation includes 17 million euros for a sign-on bonus, 5.8 million euros for two years' wages and the reduced 2 million euros for reputational damage, plus interest.
Orcel is also to be awarded 18.6 million euros in shares from a buyout clause and linked to long-term goals, which Santander said in a statement amounted to around 4 million euros based on their current valuation, putting the total compensation at around 28.8 million.
Santander said: "Mr Orcel will now have to return 8 million euros, plus interest."
The bank just met around a third part of its long-term incentives for senior executives from 2018 to 2020, a source familiar with the matter said.
Banks in Europe and at a global level had limited scope to pursue their normal dividend policy as central banks set limits for shareholder remuneration during part of that period due to the COVID-19 outbreak.
Orcel had quit his highly paid role at UBS in anticipation of taking up his new position at Santander, giving up sizeable deferred compensation.
He had originally sought as much as 112 million euros for breach of contract.
But once he became CEO of Italian bank UniCredit (LON:0RLS) in 2021, he amended the lawsuit reducing the claim.
($1 = 0.9287 euros)
(This story has been refiled to fix format)