Photographer: Gianluca Colla/Bloomberg

Swiss Keep Corporate Allure as Basic Income, Pay Curbs Defeated

  • Voters dismissed popular initiatives at Sunday’s ballot
  • Referendums are part of Switzerland’s direct democracy

The Swiss rejected two popular initiatives that constituted the latest threat to the country’s business-friendly environment.

Voters dismissed a measure that would have reduced the pay of Swisscom AG’s chief executive officer by three quarters and also shot down a proposal to establish a universal basic income, the federal chancellery said on Sunday. While surveys indicated the latter would fail, the outcome of the former -- the so-called Pro Service Public initiative -- had been considered too close to call.

Sunday’s vote “reinforces Switzerland as a favorable place to do business and be fiscally prudent,” said Jon Cox head of Swiss equities at Kepler Cheuvreux in Zurich, adding that it would likely have a positive effect on the stock market. “It’s a relief for business and for Switzerland’s reputation.”

Plebiscites are a key feature of the country’s direct democracy, with votes typically held four times a year on a wide range of topics, and 100,000 signatures are required to make the national ballot. Voters also rejected an automobile infrastructure-financing measure, but backed the government’s proposed change to the asylum-granting process.

For a QuickTake explainer on Switzerland’s people power, click here.

Pro Service Public, which aimed at improving public services at Swisscom, rail-road operator SBB and the national postal service, is the latest in a series of popular initiatives critical of high-earners and big business and follows a 2013 plebiscite that introduced some of the world’s toughest rules on executive pay. In 2014 they voted for immigration curbs despite warnings of damage to the economy.

Pro Service Public contained the requirement that an executive be paid no more than a government minister. It would also have banned cross-subsidization between companies and stopped firms from aiming to post a profit in the area of basic services.

Restricting top earners’ incomes would have triggered a cascade of pay cuts, affecting more than 7,000 people at the three companies, according to a study conducted by University of Zurich commissioned by the “no”-committee.

Swisscom, in which the state holds a 51 percent stake, issued a statement welcoming the outcome of the vote.

Voters “weren’t seduced by the title” of the initiative, said Transport Minister Doris Leuthard, who had argued the measure would weaken rather then improve public services. “It’s a sign of political maturity.”

High Salaries

Still, curbs on executive pay at state-controlled companies aren’t yet off the table. According to SonntagsBlick newspaper, Social Democrat lawmaker Corrado Pardini will propose a motion in parliament for a wage ceiling of 500,000 francs ($512,350).

“Criticizing high salaries is a powerful argument,” said Patrick Emmenegger, a professor of political economy at the University of St. Gallen. “People have trouble understanding the rationale behind paying large sums to individuals.”

For a QuickTake explainer on basic income, click here.

As for the basic income measure, it was launched to guarantee everyone “a decent existence” in one of the world’s wealthiest countries. While the initiators had left it up to the government to decide how large the stipend should be, they suggested 2,500 francs for an adult and a quarter of that sum for a child. They estimated the plan would have cost 200 billion francs a year, with funding stemming from current state and social welfare programs.

The government argued it would have forced tax increases and created a disincentive to work, potentially leading to shortages of skilled employees and prompting companies to move outside of Switzerland.

International Attention

The idea of paying everyone a stipend, regardless of how much they work, isn’t unique to Switzerland. Finland enacted an initial study on the matter last year, and it has also drawn interest in Canada and the Netherlands. Among the best-known proponents of the endeavor is former Greek Finance Minister Yanis Varoufakis, who contends it would help offset the ill effects from automation, which eliminates jobs.

“There has been an enormous interest from abroad, we started a trend,” Daniel Haeni, one of the initiators of the basic income proposal, told SRF. “It would have been naive to expect the basic income to be accepted in the first try. In Switzerland, all big changes need several attempts to pass.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE