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* CEO is bank's top earner
* New investment bank head gets $26 mln welcome
* Campaigning shareholder slams UBS
* Chairman Weber, paid 3.57 mln Sfr, defends compensation
* UBS shareholder meeting on May 2
By Katharina Bart and Anjuli Davies
ZURICH/LONDON, March 14 (Reuters) - UBS drew fireon Thursday as it announced it paid CEO Sergio Ermotti almost $9million in 2012 and welcomed a new investment bank chief with a$26 million package, just as the Swiss bank is in the process offiring 10,000 staff.
Executive pay in Switzerland remains a heated issue fiveyears after the near collapse of UBS, blamed by many on a bigbonus culture driving bankers to take excessive risks.
"UBS has still not learnt from the mistakes of the past,"said Brigitta Moser-Harder, an outspoken retail shareholder ofUBS who campaigned for strict controls on executive pay thatwere adopted in a Swiss referendum earlier this month.
Investment bank chief Andrea Orcel, who is overseeing aradical restructuring of that operation in which 2,000 jobs areexpected to go, secured a package worth 25 million Swiss francs($26.27 million), according to UBS's annual report on Thursday.
It comprises $6.364 million in deferred cash and deferredUBS shares worth 18.5 million francs ($19.44 million) at thegrant date. The deferred cash and shares will vest ininstalments in 2013, 2014 and 2015.
The deal was designed to replace forfeited pay from hisformer employer, Bank of America Merrill Lynch, after hejoined the Swiss bank in July 2012. Orcel's regular salary for2012 was not disclosed.
Moser-Harder told Reuters that Orcel's payment wasoutrageous: "Not only did the investment bank contribute a lossin the billions, it is also being massively scaled back."
The Swiss vote two weeks ago will give shareholders abinding vote on remuneration, ban big rewards for new anddeparting managers and impose possible jail sentences and finesfor breaches of the new rules.
Swiss drugmaker Novartis was forced to scrap aproposed $78 million payment to outgoing chairman Daniel Vasellain February after a public outcry.
UBS Chairman Axel Weber, whose 4 million franc signing-onfee sparked enough shareholder anger to garner a one-thirdopposition to the bank's overall pay scheme last year, earned3.57 million francs in 2012.
The news follows another turbulent year for UBS, whichposted a full-year net loss after saying it would fire 10,000employees as it exits large parts of its fixed-income business.
In December UBS said it would have to pay $1.5 billion tosettle its role in a multi-year global rate-rigging scheme.
ISSUES FROM THE PAST
In an internal memo, Weber defended the payments, noting theexecutives did not receive any cash bonuses, but were rewardedwith deferred instruments subject to the risk of forfeiture.
"Negative results that arise due to issues from the past andthe acceleration of restructuring at UBS should be vieweddifferently from an operating loss," he said, adding the UBSshare price rose by 28 percent in 2012.
"We reduced our risks substantially in 2012, and shrunk ourbalance sheet. UBS's capital strength under Basel III is nowclearly industry leading. We have also regained clientconfidence in Switzerland and abroad."
Ermotti was the Swiss bank's highest earner last year,pipping Americas wealth management division head Robert McCann,who was paid most in 2011. McCann earned 8.56 million francs in2012, compared with 9.18 million in 2011.
UBS cut its overall bonus pool for 2012 by 7 percent to 2.5billion francs and introduced a scheme under which bankers canbe paid in a form of deferred financial instruments that arerevoked if the bank's capital targets are not met.
Weber said the total compensation for the top managementteam had also been cut by 7 percent, with McCann seeing hisbonus down 8 percent despite the fact his division achievedrecord results in 2012.
Ermotti's pay is a 40 percent increase on 2011, but he onlyjoined the bank in April of that year and was named CEO inNovember 2011 after a $2 billion rogue-trading scandal felledhis predecessor, Oswald Gruebel.
The CEO's base pay was 2.5 million francs, with more than 6million francs in bonus awards.
In January, Jamie Dimon, JPMorgan Chase's ChiefExecutive, had his 2012 bonus cut in half after $6.2 billion oftrading losses in the "London Whale" affair.
Barclays Chief Executive Antony Jenkins got a package worth2.6 million pounds ($3.88 million) for 2012, while RBS bossStephen Hester received 3.27 million pounds, but waived hisbonus after the bank suffered a computer systems failure.
UBS's shareholder meeting is on May 2. Rival bank CreditSuisse is expected to disclose its top management andboard pay on March 22.
