Andrea Orcel sues Santander for $113.0m after CEO offer rescinded

According to Bloomberg, who cited a person familiar with the matter, Orcel is suing the Spanish lender for fulfillment of contract.

In an unusual move, in September 2018, Santander publicly announced that it had chosen Orcel to become its new CEO, but just a few months later, in January, it reneged.

When naming Orcel, Santander's board assumed that UBS would not consider the Italian banker's change of employer as moving to a competitor - which it did - meaning that he was at risk of forfeiting roughly €50.0m in deferred awards or bonuses or at least that he would only lose a part of those.

But that turned out not to be the case.

Neither has it since transpired what written commitments - if any - Orcel had obtained from Santander's board before leaving UBS, but in any case Santander's decision to walk back on his appointment came as a shock to many in the industry, fueling various lines of speculation.

When it announced its decision "not to proceed" with Orcel's appointment on 15 January, Santander argued that it had been subject to "the usual conditions".

"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," Santander said in a statement issued at the time.

Indeed, for some market observers, the key factor was Santander's concern around the potential political backlash in Spain should it hire Orcel at such an elevated cost.

Nevertheless, for others it was more a matter of personal differences between him and Santander's current executive chairwoman, Ana Patricia Botin.

ISS Governance, a proxy adviser for institutional shareholders, said in April that the entire fiasco had hurt the lender's reputation and criticised Santander's board, particularly those of the head of its appointments and remunerations committees.

As of 1605 BST, shares of Santander were rising by 1.30% to €4.16.