The Swiss Vote Overwhelmingly For Executive Pay Curbs
On Sunday, Swiss citizens voted with 67.9 percent margin to impose some of the most restricting rules on executive compensation. All of Switzerland’s 26 cantons passed the initiative, which is a rare occurrence. This will allow shareholders to veto executive pay proposals and will give them the power to ban big rewards for new and departing managers.
67.9 percent is one of the highest approval rates that Switzerland has ever seen for a popular initiative. It goes to show that the built up anger and plain outrage, caused by multi-million payouts for executives, can translate into decisive and convincing action in Switzerland’s direct democracy.
Anger rose due to big bonuses that were blamed for fueling risky investments that almost knocked down UBS, one of the largest financial services firm in Switzerland. Adding fuel to the fire was the proposed $78 million payment to outgoing former head of pharmaceuticals giant Novartis, Daniel Vasella.
The opponents of this initiative argued that the executives who are offered better pay elsewhere would leave the country. They also argued that these new measures would damage the country’s competitiveness and possibly scare away international talent.
Mr. Minder, the man who started this campaign, countered: “Investors put their money where they have the most to say, and that will clearly then be Switzerland.”
This outrage over what the public considered to be reprehensible levels of pay and bonuses for executives, has fueled anger in other countries as well, although Switzerland avoided an economic crisis of the sort seen in the European Union.
The only way to manage this out of control executive pay, according to Minder, is to give the shareholders the power to decide the amount of the pay. The Swiss government and the Council of States have been against the initiative from the very beginning. They cautioned that the headquarters of some large companies might move out of the country due to these new rules.
Minder hopes this initiative to be an inspiration for other countries and is convinced that it will be Switzerland’s next “best export product”.
According to the text of the initiative, any company mentioned on the list that doesn’t follow the rules could face a fine up to six years of the total salary it pays to its executives and up to three years in prison for the top level decision makers.