Swiss Voters Get Their Say on Pay

The nation will hold a referendum on “fat cat” salaries in March | “Shameless executive payouts have very clearly come from the U.S.”

Patrick Winters and Eva von Schaper, with Simeon Bennett

Daniel Vasella


Swiss chief executive officers, including Roche Holding’s Severin Schwan and Nestlé’s Paul Bulcke, earn some of the world’s highest salaries. That may soon change. With more than 100,000 Swiss citizens having signed a petition to limit what they call “fat cat” pay, voters will decide in a March 3 referendum whether top executives should have their compensation set by shareholders rather than the members of clubby corporate boards. While a recent poll shows a majority may vote yes, the nation’s business lobby warns the move will drive out tax-paying companies. “If you have this kind of limitation on executive pay, why should an American company put their European headquarters into Switzerland?” asks Philip Mosimann, CEO of Bucher Industries, a Swiss maker of street sweepers. “They would leave. I’m certain of that.”

Arguments that unfettered pay is needed to draw executives to Switzerland took a big hit on Feb. 15, when it became public that the board of Swiss drugmaker Novartis had agreed to a 72 million Swiss franc ($78 million) payment to outgoing Chairman Daniel Vasella to keep him from working for a rival after he retires on Feb. 22. Such payouts for departing managers would be criminalized if the referendum passes. Vasella received 13.1 million francs in compensation last year. Franz Humer, chairman of crosstown rival Roche, received 8.67 million francs in compensation last year.

Amid a public uproar, Vasella agreed on Feb. 19 to cancel the payout, but the damage had been done. “This news is a setback for the campaign,” says Meinrad Vetter, an official at Economiesuisse, a business group that’s lobbying voters to reject the executive pay vote. “There will be talk of anger and excessive salaries, rather than about what the initiative really means for Switzerland as a business location.”

The referendum is the brainchild of Thomas Minder, a Swiss lawmaker and managing director of herbal toothpaste business Trybol, whose petition blames highly paid fat cats — Abzocker in German — for the global financial crisis. If successful, the proposal will give investors an annual ballot on executive pay. “Shameless executive payouts have very clearly come from the U.S.,” says Brigitta Moser-Harder, an activist stockholder. She owns shares of the country’s biggest bank, UBS, and largest engineering company, ABB, and regularly speaks on the subject at annual shareholder meetings and on Swiss TV. “People have been outraged about high earners for years.”

Trybol’s Minder, who has an MBA from Fordham University in New York, has led a five-year campaign after collecting the signatures needed for a referendum. The former Swiss army company commander wants to curb what he sees as a culture of chiefs who only stay for a short time and are still rewarded with high salaries, according to his campaign website. Minder’s referendum calls for the elimination of sign-on bonuses, as well as severance packages and extra incentives for completing merger transactions. He proposes to punish executives who violate those terms with as long as three years in jail. A survey conducted in mid-February by researcher Gfs.bern showed 64 percent of 1,416 voters supported Minder’s proposal.

Opposition to excessive executive pay has been building in Switzerland, even though the country has the highest average monthly wage in Europe, $7,765.50, according to the United Nations. Minder and Moser-Harder say payouts such as the 71 million francs worth of shares that Brady Dougan, Credit Suisse Group’s CEO, received in 2010 under an incentive program created five years earlier show how executive compensation has become disconnected from average salaries.

At least five of Europe’s 20 highest-paid CEOs work for Swiss companies, according to data compiled by Bloomberg. The list includes three Americans — Dougan, Joe Jimenez of Novartis, and Joe Hogan of ABB — as well as Roche’s Austrian chief, Schwan, and Nestlé’s Bulcke, of Belgium.

Jimenez, Switzerland’s highest-earning CEO, got 13.2 million francs in 2012, and Schwan received 12.5 million francs. That compares with an average of about €2.7 million (3.3 million francs) for CEOs of companies in the Stoxx Europe 600 Index that have disclosed 2012 executive salaries, according to data compiled by Bloomberg.

Economiesuisse has budgeted as much as 8 million francs for its campaign to block the initiative and backs a counterproposal from the government, which would automatically come into force next year if the Swiss vote no on Minder’s referendum. The government plan would allow shareholders of individual companies to decide if they want to propose a binding vote on compensation. That plan, backed by big Swiss corporations including Novartis, Credit Suisse, Syngenta, and UBS, would also omit Minder’s requirement for a binding shareholder vote, prison sentences, and a ban on sign-on bonuses.

The bottom line Swiss citizens will vote on tough executive pay restrictions next month. A recent poll shows 64 percent of voters support the measure.


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