Swiss Go to Polls on ‘Fat Cat’ Pay as Approval Probable
The Swiss vote today on whether to give shareholders some of the world’s strongest powers to determine the pay of top executives. Approval looks probable.
Nearly two thirds of voters plan to back the so-called anti-fat cat initiative in the referendum that would allow a binding annual shareholder vote on executive compensation for listed companies and block big payouts for new hires and for managers when they leave. Executives who break the rules could face fines and jail.
Voting will end at noon local time and results are expected later today. Most Swiss will have cast their ballots by mail.
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 Novartis (NOVN) AG Chief Executive Officer Joe Jimenez and Nestle SA (NESN) CEO Paul Bulcke.
“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 topic 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 undermined the campaign’s critics. 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 longer statutory vacation.
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 in 2008. The matter also touches on the issue of immigration. Foreign managers -- among them Credit Suisse Group AG (CSGN) Chief Executive Officer Brady Dougan -- can receive as much as 13 million francs ($13.8 million) a year, while nurses, hotel staff and construction workers complain they face competition from immigrants 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. (ABBN)’s Joe Hogan and Jimenez of Novartis. Roche Holding AG (ROG)’s Austrian chief Severin Schwan and Nestle’s Bulcke of Belgium are also in the top tier.
The initiative was backed by 64 percent of voters questioned by pollster gfs.bern with 27 percent opposing it. The poll, conducted among 1,416 voters between Feb. 8 and Feb. 15, had a margin of error of 3.3 percentage points.
If the measure succeeds, the Swiss will have stiffer rules than Germany or Britain. As the economy contracted in 2009, German Chancellor Angela Merkel passed a law giving supervisory boards more power to curb executives pay. In the 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 that makes 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. (RIG) and oilfield service company Weatherford International Ltd. (WFT), 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 taxpaying companies. It favors a less stringent counterproposal.
If voters back the curbs as expected, the government will have to amend national laws. That process of implementation will probably prove complicated, given that the parties in parliament disagree about the pay limits: while the Social Democrats support Minder’s plan, the pro-business Free Democrats are against it.
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