March 11 (Bloomberg) -- Nestle SA, the world’s largest food company, announced changes to its corporate bylaws to abide by new Swiss limits on compensation, setting the wheels in motion for shareholder votes next year on executive pay.
Investors will have a binding vote on board pay as well as on the maximum pay for top executives, the Vevey, Switzerland-based company said today in a letter to shareholders.
The changes follow a referendum last year in which Swiss voters approved some of the world’s toughest limits on executive pay. The vote made Switzerland one of only a few countries that require a binding shareholder vote. Those that pay or accept excessive remuneration face the possibility of fines or jail terms of as long as three years, the Swiss government has said.
“We propose this revision a year ahead of legal requirements in order to create the legal certainty that we need for our company and to live up to our own commitment to be at the forefront of corporate governance practices in Switzerland,” Nestle Chairman Peter Brabeck-Letmathe said in the letter.
The government gave companies until next year to adjust their articles of association when it approved the initiative against “fat cats,” proposed by Thomas Minder, the head of an herbal toothpaste company. Zurich Insurance Group AG, the biggest Swiss insurer, released its plans March 7.
The initiative also calls for the annual election of directors. Currently, three-year terms are in place at Nestle, and are common at Swiss companies.
Should Nestle shareholders reject the company’s proposed compensation next year, the board can submit a new figure at the same annual meeting, at an extraordinary general meeting, or at the next annual meeting, according to the letter. Nestle’s shareholders are scheduled to meet April 10 in Lausanne.
Ethos, a Swiss corporate governance group, has said it recommends companies have a separate vote for fixed and variable remuneration. The group also said it won’t accept voting for pay in advance unless the mechanisms linking pay to performance are published in detail.
Nestle said it will continue to submit its compensation report to shareholders for a separate, non-binding vote.
Nestle Chief Executive Officer Paul Bulcke received 9.3 million Swiss francs ($10.6 million) last year, a 6.7 percent decline from the previous year, according to company documents.
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