Spanish Court Orders Santander To Pay UniCredit CEO $77 Million For Breach Of Contract

UniCredit CEO Andrea Orcel is already riding high as investors have embraced his turnaround strategy for the troubled Italian lender (a strategy that entails returning billions of euros in profits to shareholders of Italy’s largest bank over the coming years). The bank’s shares were among the few European banking stocks to trade in the green on Friday.

But that’s not the only reason for Orcel, who is well on his way to becoming one of Europe’s most celebrated bankers, to celebrate heading into the weekend.

Orcel, a European banker of Italian origin, has just won a major court victory against Banco Santander after a Spanish court ruled on Friday that Santander must shell out €68 million euros ($77 million) to Orcel for breaking a contract to bring him on as CEO.

Fortunately for him, Orcel swiftly bounced back after being dumped by Santander by taking the top job at Unicredit. But, as the court decided, the fact that Orcel found another job doesn’t excuse Santander from its contractual obligations.

The case saw Orcel face off against Santander Chairman Ana Botin in what Bloomberg described as an “unprecedented” dispute over pay. It also handed an important victory to the Italian banker, Bloomberg reports.

For Botin, the expensive defeat leaves her facing further questions about her managerial abilities, particularly when it comes to the botched appointment, and why she pulled back on the offer so close to Orcel’s planned start date.

When he filed the lawsuit, Orcel, 58, was seeking €76MM ($86MM) from Spain’s top lender for breach of contract, claiming he lost millions of dollars in deferred compensation from his former employer, UBS Group, along with years of prospective salary at Santander. Until UniCredit decided to replace Jean Pierre Mustier as CEO earlier this year, Orcel had spent the interim period without any major role in banking.

Santander reversed its decision to hire Orcel over alleged conflicts on the issue of his deferred UBS compensation. Santander had expected the Swiss bank to pay at least 50% of the deferred pay he was in line to receive. Santander said it had agreed with Orcel that he would make his “best effort” to reduce the cost to the Spanish bank of his deferred compensation from UBS.

Botin stunned the financial world in September 2018 when she announced the hiring of Orcel. At the time, the investment-banking star had appeared to be an unlikely choice to lead a bank mostly focused on consumer lending. Making the situation even more uncomfortably, Jose Antonio Alvarez, the veteran CEO whom Orcel was to have replaced, remains in his job, leaving questions about Santander’s longer-term management direction.