Swiss back executive pay limits in ballot

Catherine Bosley Zurich

THE SWISS government must figure out how to translate some of the world’s toughest rules on executive pay into national law and risk an exodus of big corporations after voters overwhelmingly backed new curbs in a referendum.

Thomas Minder (R), councillor of State and initiator of the 'Against rip-off' initiative poses with members of the committee during a voting event in Schaffhausen March 3, 2013. Swiss citizens voted on Sunday to impose some of the world's strictest controls on executive pay, forcing public companies to give shareholders a binding vote on compensation, initial result projections showed. REUTERS/Michael Buholzer (SWITZERLAND - Tags: POLITICS BUSINESS). Credit: REUTERS

Swiss voters, still smarting after the country’s biggest bank, UBS, had to take state aid during the financial crisis, approved a proposal by a margin of 67.9 percent.

The pay limits include a binding annual shareholder vote on executive compensation for listed companies and a ban on big payouts for new hires and for managers when they leave. Executives who violate the terms can be punished with as long as three years in jail.

The result is a triumph for Thomas Minder, the manager of a century-old natural cosmetics company, who started the initiative in 2006.

He has overcome the opposition of high-profile corporate chief executives such as Nestlé’s Paul Bulcke, the government, and parliament in Bern. They said the curbs would damage Switzerland’s ability to serve as a base for big corporations like oilfield services firm Weatherford International.

“In Switzerland we say: ‘The soup is seldom eaten as hot as it is served’,” Bucher Industries chief executive Philip Mosimann said yesterday. “The big question is how it gets implemented.”

Measures voted in through plebiscite take effect immediately, while the government amends national laws, a process that can drag on.

“There won’t be something immediately, there will be some discussions,” said Lorenz Hess, a member of the Conservative Democratic Party, which opposed the initiative.

In issuing its ordinances, the government would stick closely to Minder’s text, Justice Minister Simonetta Sommaruga said. “The people has expressed its resentment and the government understands this resentment,” she said.

The salaries of chief executives have been a sore point with the Swiss public since UBS had to be bailed out in 2008. Foreign heads of corporations receive as much as Sf13 million (R125m) in annual pay, while blue-collar wage earners complain immigration is pressuring their wages.

Labour union Unia said the vote sent politicians a clear message they needed to do more to rein in corporate excesses and do more to address falling blue-collar wages.

Minder’s plan applies to Swiss firms listed at home or abroad. His success highlights the disparity between multinational corporations like UBS and Credit Suisse and the small and medium-sized businesses that form the backbone of the economy. Minder’s Trybol has 18 employees.

At least five of Europe’s 20 highest-paid chief executives work for Swiss companies.

The companies are Credit Suisse, ABB, Novartis, Roche Holding and Nestlé.

“The negative consequences will be limited,” said Mosimann, who received compensation of nearly Sf1.4m in 2011. “But I hope that some boards, particularly in the financial and pharmaceuticals industry, will look matters over again.” – Bloomberg