Swiss voters will probably give shareholders some of the world’s strongest powers to determine the pay of top executives, a plan opponents say will make Switzerland less attractive to big corporations.
Nearly two thirds of voters plan to back the “anti-fat cat” initiative in a March 3 referendum that would allow a binding annual shareholder vote on executive compensation for listed firms and block big payouts for new hires and for managers when they leave. Executives who break the rules could face fines and jail. A Feb. 20 survey by the gfs.bern polling institute saw 64 percent of voters backing the measure, with 27 percent opposing it.
Governments across Europe are considering limits to manager compensation after using taxpayer money to aid banks and corporations during the financial crisis. If successful, the measure would make Swiss shareholders among the most powerful in determining the bosses’ paychecks, among them Joe Jimenez and Paul Bulcke, who head Novartis AG and Nestle SA.
“People are allergic to this shift towards an Anglo-Saxon pay culture,” said Michael Hermann, a political scientist at the University of Zurich. “Not only the social-democratic left, but also conservative voters from the countryside and small towns don’t like it.”
The Abzockerinitiative -- German for fat-cat initiative -- has dominated Swiss media coverage in the past months. Novartis’s plan to pay outgoing chairman Daniel Vasella as much as $78 million to prevent him from working for rival companies added fuel to the fire. In response to public ire, Europe’s biggest drugmaker scrapped the accord last week.
Popular initiatives are commonplace in Swiss politics, on issues ranging from health care to European Union membership. At least 100,000 signatures are needed for an initiative to come up for a national ballot. Voters repeatedly have taken a pro-business view in referendums about taxes. Last year, they also rejected a proposal for six weeks of statutory vacation.
How much executives take home was called into question in Switzerland after the country’s biggest bank, UBS AG, had to be bailed out in 2008. The matter also touches on the issue of immigration. Foreign managers -- among them Credit Suisse Group AG Chief Executive Officer Brady Dougan -- can receive huge sums, while nurses, hotel staff and construction workers complain immigrants are willing to do their jobs for less.
At least five of Europe’s 20 highest-paid CEOs work for Swiss companies, according to data compiled by Bloomberg. Among them are the Americans Dougan, ABB Ltd.’s Joe Hogan and Jimenez of Novartis. Roche Holding AG’s Austrian chief Severin Schwan and Nestle’s Bulcke of Belgium are also in the top tier.
Polls close at midday on March 3, though most voters cast their ballot by mail before then. The government will announce the result late in the day. If the measure succeeds, the Swiss will have stiffer rules than Germany or Britain. U.K. public companies will have to give shareholders binding votes on executive pay every three years, Business Secretary Vince Cable said in June.
The initiative was started by Thomas Minder, managing director of a company making herbal toothpaste, who blames highly-paid executives for the financial crisis. Minder says big payouts highlight the gap between corporate chiefs and the average wage earner.
Critics of the initiative say it would make Switzerland less appealing to multinationals such as offshore drilling contractor Transocean Ltd. and oilfield service company Weatherford International Ltd., which moved to the Alpine nation to take advantage of a low tax rate.
“It would criminalize society,” Nestle CEO Bulcke told Blick newspaper in a Feb. 15 interview. “Clearly, in the longer term it will make Switzerland less attractive for entrepreneurs and managers.”
Business lobby Economiesuisse has also warned that passing Minder’s measure will drive out tax-paying companies. It favors a less stringent counter proposal.
If voters back the curbs as expected, the government will have to amend national laws. That process of implementation will likely prove complicated, given that the various parties in parliament disagree about the pay limits: While the Social Democrats support Minder’s plan, the pro-business Free Democrats are against it.