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18th January 2019
Santander cancels new CEO appointment due to 'unacceptable costs’
Grupo Santander Board has announces that Andrea Orcel’s appointment to the role of Group CEO will not proceed. The Board made the decision to appoint Andrea Orcel in September 2018. In light of his seniority, along with regulatory, legal and contractual considerations, an early announcement of the appointment was necessary, subject to the usual conditions, including a six-month garden leave.
At that time, the Board had agreed the terms of his annual remuneration in his future role at Santander, which were in line with that of José Antonio Álvarez. It was not, however, possible, to determine in advance the final cost of the Group’s share of compensating Mr Orcel for the remuneration awards, made to him by his previous employer, that would have been foregone. The Board therefore proceeded with the appointment on the basis of a considered estimate of the likely cost to Santander, based on advice, precedent and expectations of mitigation, due to the nature of the relationship between the two organisations and the different activities carried out by each institution.
In recent months, discussions have been taking place over the terms of Mr Orcel’s departure from his previous employer. It has now become clear that the cost to Santander of compensating Mr Orcel for the deferred awards he has earned over the past seven years, and other benefits previously awarded to him, would be a sum significantly above the Board’s original expectations at the time of the appointment.
The Board considers that for Santander to pay this amount to facilitate the hiring of one individual, even one of the calibre and background of Mr Orcel, would be unacceptable for a retail and commercial bank such as Santander. As such, it has been decided by the Board that it would not be right to proceed with the appointment.
José Antonio Álvarez, who has remained in the role since the announcement and his anticipated transition in March to Chairman of Santander Spain, will continue to serve in this role without change. He will also serve as Vice Chairman of the Board. Rodrigo Echenique, who is due to retire from his current role as Chairman of Santander Spain in March, will remain until a successor is named.
Ana Botin, Executive Chairman of the Board said: “Santander is a retail and commercial bank with significant responsibilities to the societies in which it operates. In making this decision we have had to balance the respect we have for all of our stakeholders with the very significant cost of hiring one individual, even one as talented as Andrea, by compensating for the loss of a significant proportion of seven years of his past remuneration. The Board and I are certain that this decision, although difficult to take, is the right one.”