By Jesús Aguado

MADRID, Reuters – Santander (MC) intends to contest a court decision that it must pay Andrea Orcel 68 Million Euros ($77M) for its change of mind about making him CEO. However lawyers claim the bank only has a small chance of regaining much from a fight that has caused damage to its reputation.

Madrid’s highest-profile employment dispute saw a Madrid judge rule that the four-page offer letter from the Spanish lender to Orcel, September 2018, was a contract. Four months later, the bank decided to end his appointment.

Santander said that Orcel would have to be paid deferred payments if Santander was going to leave UBS. His appointment had been too costly.

Although the ruling was financially affordable, it was devastating for Santander Chairman Ana Botin. Ana Botin had previously courted the Italian executive before appearing in court to defend Santander’s decision to change its course.

Santander now says that it’s preparing for an appeal. This must be done within 20 days from the publication date of Dec. 10, 2010.

Experts, lawyers and bankers believe that there are few ways to reverse the main decision of Judge Javier Sanchez Beltran: The offer letter is legally binding.

They have every chance against them, but Santander can certainly appeal. Enrique Quemada (chairman of Spanish investment bank ONEtoONE) stated that the offer letter indicated there had been an agreement.

An unrelated lawyer, who didn’t want to be named, also claimed that the offer letter was valid because it had been approved by the nominations committee and chairman of the bank and that the announcement had gone public.

Botin told Santander that the offer letter was not an agreement and Santander had not approved the final salary package.

The judge referred to tweets she sent and interviews with media in which Orcel stated that her appointment would begin “effectively at the beginning of 2019”.

Santander cannot present any new evidence in appeal. Santander must therefore reaffirm its claim that the letter is not a contract. Sources say that appeal could continue all the way up to Spain’s Supreme Court. That could make it several years before the matter is settled.

Both sides can agree to an outside settlement anytime during the proceedings.

Orcel didn’t respond to calls and messages requesting a comment.

According to sources and lawyers familiar with the matter, Santander is more likely to challenge the 10,000,000 euros in compensation Orcel received for “moral harm” by Madrid courts, than the 17 million-euro sign-on bonus or the 35 million buyout clause, and 5.8 millions for his two year salary.

Even though Santander’s “moral damage” was hard to prove, Orcel said that the bank’s withdrawal caused “considerable frustration and uneasiness,” uncertainty, and discredit within the banking industry.

Independent lawyer said that “the 10 million euros in moral damage is something that could be contested because it’s quite high” but it was up to the judge. Santander’s sources say that the appeal could be used to change the court decision. However, another source said that “reducing the amount would be better than the current one.”

Santander did not respond to our request for comment.

Santander initially offered Orcel a sum of up to 112 millions euros for his breach of contract claim and career damage. He dropped part his claim in May after being named UniCredit CEO.

REPUTATION BLOW

Academics and analysts said that the court decision highlighted flaws in Santander’s management.

Jose Carlos Diez is an associate professor of Economics at University of Alcala de Henares. “It’s not a good decision in terms of corporate Governance (…). My concern is how this ruling will affect investors perception of governance.”

Investors criticized the bank’s April 2019 handling of Orcel’s termination of employment at its first shareholder meeting following Santander’s U-turn.

Santander insists that Santander was appointed in good faith after a thorough governance process. This included the board’s nominations and remuneration commissions. They met thirteen times throughout this process.

Analysts, bankers, and academics do not see any financial consequences for Santander. The bank should be careful to avoid making the same mistake again.

Quemada explained that “In future, the bank will be even more careful in searching for the next CEO or senior managers.”

($1 = 0.8873 euros)