Executive life in Switzerland will soon be less lucrative after more than two-thirds of Swiss voted yesterday in favour of capping pay at listed companies.
Some 68 per cent backed the so-called “rip-off initiative” in a referendum, giving shareholders a veto over salaries of managers and board members. New provisions, to be anchored in the Swiss constitution, will outlaw golden handshakes for arriving and departing managers, plus bonus payments for executives involved in mergers and acquisitions.
At general meetings, pension funds and other institutional investors will be obliged to act in the interests of their investors and publish their votes.
Managers and board members will, in future, be re-elected at company agms to obviate the need for payouts for prematurely ending multiannual contracts.
Breaches of the new law will result in fines of up to six years’ pay or a prison term of up to three years.
Grassroots initiative
The grassroots initiative, launched seven years ago by a manager-turned-politician Thomas Minder, collected donations via an online platform. Yesterday, he said it would end an era of large bonus payments to managers regardless of their – or their company’s – performance.
It handed shareholders greater ability to intervene in bonus awards, he said, and would discourage short-term thinking damaging to a company’s long-term interests.
“I’m just happy the long campaign is over. It’s a huge signal with over 60 per cent,” said Mr Minder of the vote, backed by all 26 Swiss regions or cantons.
At least five of Europe’s top-20 highest paid executives work for Swiss firms, including Nestlé, Credit Suisse and drug firm Novartis.
Criticism
Critics of the campaign, who proposed a milder reform, said the vote would make Switzerland less attractive to international companies.
Economiesuisse, the industry federation that spearheaded a €6.5 million campaign against the initiative, admitted its campaign had been damaged by public outrage over corporate pay-offs at the loss-making UBS bank and Novartis.
Last month, Novartis scrapped plans to pay departing chairman Daniel Vasella up to €60 million in a non-compete bonus.
