Swiss voters approved some of the world’s toughest limits on executives’ pay in a referendum, a move critics say could make Switzerland less attractive to multinational corporations.
The initiative against “fat cats,” proposed by Thomas Minder, head of a herbal toothpaste company, was backed by 67.9 percent of the voters today, the government said on its website today. The turnout was 46 percent. Polls, including one by gfs.bern, had signaled that outcome as probable.
The proposal gives shareholders an annual ballot on managers’ pay. It eliminates sign-on bonuses, as well as severance packages and extra incentives for completing merger transactions. The initiative also includes rules punishing executives who violate the terms with as long as three years in jail.
“I’m glad the long battle is over,” Minder, who started the campaign in 2006, told Swiss television. “It’s a powerful sign, this proportion above 60 percent.”
At least five of Europe’s 20 highest-paid chief executive officers work for Swiss companies, according to data compiled by Bloomberg. Among them are the Credit Suisse Group AG CEO Brady Dougan, ABB Ltd. (ABBN)’s Joe Hogan and Joe Jimenez of Novartis AG. (NOVN) Roche Holding AG (ROG)’s chief Severin Schwan and Nestle SA (NESN)’s Paul Bulcke are also in the top tier.
The initiative got a boost when news broke last month that Novartis was planning to pay outgoing chairman Daniel Vasella as much as $78 million to prevent him from potentially working for rival companies. In response to public ire, Europe’s biggest drugmaker scrapped the accord.
Thanks to low taxes and limited bureaucracy, big corporations, including offshore drilling contractor Transocean Ltd. (RIG) and oilfield service company Weatherford International Ltd. (WFT), choose Switzerland as their base.
How much executives take home was called into question in Switzerland after the country’s biggest bank, UBS AG (UBSN), had to be bailed out during the financial crisis, while in 2010 Credit Suisse (CSGN) CEO Dougan received 71 million francs ($76 million) of shares. That compares with a gross average Swiss monthly wage of $7,800 for 2011, according to UN statistics.
The result is a “negative signal for Switzerland as a place for doing business,” Economiesuisse, a business lobby which had campaigned against the proposal, said in a statement today. Nestle CEO Bulcke said on Feb. 15 Minder’s plan would make Switzerland less attractive to corporations and managers.
The Swiss are not alone in their desire to rein in executive pay in the wake of the financial crisis. Members of the European Parliament last week struck a deal to ban bonuses that are more than twice bankers’ fixed pay if starting Jan. 1, if ratified by European Union countries and the full parliament.
The nationality of Switzerland’s top executives -- Dougan, Hogan and Jimenez are American, while Schwan is Austrian and Bulcke comes from Belgium -- has also fed into the issue, with nurses, hotel staff and construction workers complaining they face competition from immigrants willing to do their jobs for lower pay.
Minder, who blames highly-paid executives for the financial crisis, collected more than 100,000 signatures, triggering today’s referendum. He says manager payouts highlight the gap between corporate chiefs and the average wage earner.
In theory, the initiative takes immediate effect, though the government could need time to issue ordinances and adapt national law. There is no set time frame for it to do so. The 2010 initiative to expel foreigners convicted of serious crimes is still before parliament, where politicians disagree about how to reconcile it with Switzerland’s obligations under international law.
In the case of Minder’s proposal, lawmakers also disagree: Social Democrats support the plan while the pro-business Free Democrats oppose it.
“The concrete implementation of Minder’s initiative should take years,” said Pascal Gentinetta, director of Economiesuisse.
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