Thomas Aebischer grew up on a farm, studied at Harvard Business School and traversed four continents to secure the top finance post at the world’s largest cement maker, Holcim. On Sunday, Swiss voters will decide if he deserves his salary.
Nine months after putting limits on excessive payouts for executives in a referendum, Europe’s best-paid voters will decide whether to cap the highest wages in a company at 12 times the lowest pay. The proposal does not mention bonuses.
Swiss corporations and the government have joined forces to oppose the so-called 1:12 initiative, which is forecast to be rejected.
“When you read the text of the proposal, it’s very simple, very clever, very misleading,” Aebischer, the Holcim chief financial officer, said.
“You would never go to the US and think: how much can I pay people now? You pay whatever you need to pay in order to attract them.”
Switzerland is home to Europe’s largest drug makers as well as the headquarters of the world’s largest oil traders, Glencore Xstrata and Vitol.
Multinational companies including Nestlé, the biggest food company, provide one in three jobs in Switzerland and pay a third of all taxes on company profits.
Still, executive payouts have ballooned in recent years while company profits have slumped and taxpayers bailed out Switzerland’s largest bank, UBS. This has led to calls for a more equal distribution of wealth.
While backers of the initiative, led by Young Socialists party leader David Roth, had to garner only 100 000 signatures from Switzerland’s 8 million citizens to trigger the ballot, they will need to overcome a historical aversion to business-unfriendly initiatives that has helped preserve Switzerland’s status as a berth for international companies.
“Our position is very clear – we are opposed to the 1:12 initiative,” said Ulrich Spiesshofer, the chief executive officer of ABB, the world’s largest maker of power transformers. “It would [markedly] weaken Switzerland’s economy, its competitiveness and the ability of Swiss companies like ABB to compete internationally.”
Voters have previously rejected longer holidays and a proposal aimed at ending tax competition between Swiss cantons, entrenching Switzerland’s position as the most competitive country behind the US, according to an annual ranking published by the World Competitiveness Center at Swiss business school IMD.
Roth said the proposal was not about hurting companies or Europe’s 10th-biggest economy; it was about distributing wealth more equally.
“In Switzerland it’s not well received when people just show off, when a certain decency is missing,” Roth said.
He said the super-rich invested speculatively in financial markets and did not contribute to the real economy. A more equal distribution of wealth would stimulate consumption because lower earners were more likely to spend money in Switzerland.
The latest polling for the ballot signals support is waning. A survey released by researcher gfs.bern on November 13 showed 54 percent of voters opposed the proposal, 36 percent were in favour and 10 percent were undecided. That is comparable to results from a poll less than three months after a March referendum that put limits on severance pay and signing bonuses. This plebiscite suggested the 1:12 proposal could pass.
Public opposition to excessive compensation peaked when it emerged in February that Novartis planned to pay outgoing chairman Daniel Vasella $78 million (R790m) for not competing with the pharmaceutical company after he left.
That restraint of trade payout was slashed to less than a 10th of the original after a public outcry.
The 1:12 initiative’s supporters say that, if passed, the measure would affect only 0.3 percent of companies and 3 400 managers.
At least five of Europe’s 20 highest-paid chief executives work for Swiss companies. Joe Jimenez of Novartis was Switzerland’s highest-paid chief executive, earning Sf13.2m (R147m) last year, while Roche chief Severin Schwan received Sf12.5m.
The average salary for chief executives of companies in Europe’s Stoxx 600 index that have disclosed executive salaries for last year was about E2.7m (R37m).
The pay scale at Holcim underscores the challenge for multinationals if they were to comply with the proposed rule. Chief executive Bernard Fontana received a base salary of Sf1.75m last year, 35 times the lowest-paid employee.
If the law was passed, companies could work around it by paying executives consulting fees or by outsourcing the lowest-paid jobs to another company, said Stephane Garelli, a professor at the IMD business school in Lausanne.
“This is a disaster for this country,” said Aebischer. “It’s a real risk and a real danger for Switzerland remaining an attractive place to do business.”
Switzerland, home to Formula One driver Kimi Raikkonen and singer Tina Turner, has more equitable income than the average of 34 countries in the Organisation for Economic Co-operation and Development, according to the body’s data from 2010.
There is a smaller gap between the richest and poorest 10 percent than in Japan, the UK, the US and Canada, the data show. According to the most recent UN data, the Swiss also have the highest gross average monthly wage in Europe at $7 765.50, which works out at about R78 716 a month at current exchange rates.
Given Switzerland’s relative income equality, the 1:12 proposal would be a drastic step, Garelli said.
“Outside of communist countries, it would definitely be the strictest executive pay law,” he said.
Still, with Swiss citizens having a direct say on the making of laws through referendums, companies needed to take into account how their compensation policies were perceived by the public, said Christian Stiefel, the managing director of Swissholdings, a group representing multinationals based in Switzerland.
That is a sentiment the 1:12 pay campaign can agree with.
“It’s surprising that we even have the chance to win it,” Roth said. “That’s already given a huge shock to our opponents.” – Bloomberg