Swiss to vote on reining in execs’ pay

AFP

Swiss voters are poised this weekend to decide whether to clip the claws of the business fat cats deemed to draw excessive salaries.

Geneva -

Swiss voters are poised this weekend to decide whether to clip the claws of the business fat cats deemed to draw excessive salaries.

Polls show that measures to empower shareholders to rein in executive pay could pass in Sunday's referendum, a bedrock of Switzerland's system of direct democracy.

Known as the Minder Initiative, after its instigator businessman Thomas Minder, the resolution results from a petition that mustered the support of 100,000 voters, enough to force a vote.

While Switzerland has avoided the level of economic crisis seen in the European Union, which surrounds the Alpine nation, public anger has risen over what is deemed abusive levels of pay and bonuses for top bosses.

Among those in the spotlight have been Daniel Vasella, head of pharmaceuticals giant Novartis, who made 15 million Swiss francs ($16 million) in 2011.

Adding fuel to the fire was Vasella's planned 72 million Swiss franc pay-off, to be paid out over six years, provided he did not go to work for the competition after stepping down this February.

The deal sparked uproar when details were leaked recently, and Novartis announced that Vasella, at the helm since 1996, would forgo the sum.

While the Novartis boss became the unwilling poster boy for the referendum campaigners, the sums made by counterparts from other companies have also been spotlighted.

Among them was the 12.5 million Swiss francs for Severin Schwan, boss of pharmaceutical powerhouse Roche, the 11.2 million of food giant Nestle's Paul Bulcke, and the 10 million of Ernst Tanner, leader of chocolate group Lindt and Spruengli.

For Minder, who runs family teeth- and hair-care business Trybol SA, the massive sums on the table show that company boards have lost control of pay.

Minder told the Swiss daily Le Temps that instead of building up reserves and paying out five-percent dividends, boards have prioritised “astronomical” executive pay.

To halt that, Minder argues that the only solution is to give shareholders the power to set pay.

The draft law set down by his referendum only covers companies listed on the stock exchange.

“That's where the abuses are flagrant,” former prosecutor Paolo Bernasconi, who backs the Minder measure, told AFP.

The measures, if backed, would also ban so-called golden hellos and golden handshakes for executives who join or leave a company.

In addition, it would ban the bonuses received for takeovers, or when a company sells off part of its business.

To give the measures clout, Minder's plan also foresees prison sentences or fines worth six years' pay for board members and bosses who fail to respect the rules.

Despite polls showing that two-thirds of voters could back the move, opponents have been fighting tooth and nail.

The “No” camp alleges that if it becomes law, Switzerland would end up with the world's most inflexible rules on listed companies.

Bernasconi said the scale of the anti-Minder campaign had been “unprecedented”.

“The government, parliament, political parties and employers have opposed it,” he underlined.

Another anti-Minder message warns that the plan could damage Swiss business overall, leading to job losses, and that has found a hearing among some trade unionists.

In the Swiss system, the government and parliament have the possibility of coming up with a counter-proposal, kept on ice pending the referendum.

The alternative to the Minder initiative has already been drafted.

It is seen as less far-reaching, simply setting a requirement for shareholders to be consulted over pay, and would apply to all companies, listed and unlisted alike.

If the Minder initiative passes, supporters would have to wait over a year until the government drafts a law to be submitted to parliament.

If that fails to win a parliamentary majority, the counter-proposal would become law directly. - Sapa-AFP