Switzerland is set to impose some of the world’s strictest curbs on executive pay following a national referendum which will force companies to get shareholder approval on “golden handshake” compensation deals among a raft of other measures.
Around 68 percent of voters support the “Rip-off Initiative”,
according to projections by Swiss public television station
If the initiative passes, shareholders will not only be given the right to hold a binding vote on both salary and bonuses for executives and directors, one-off bonuses for senior managers joining or leaving the company would be banned.
Apart from putting an end to “golden hellos” and “golden goodbyes”, all loans to executives will also have to be declared to shareholders.
The changes will apply to all publicly-traded Swiss-based companies – both domestic and offshore.
Fines of up to six annual salaries and up to three years in prison will be levied against violators of the new rules.
The Swiss public have mobilized around the proposals despite intense campaigning from business lobby group Economiesuisse, which argues the measures will drive away business, generate unemployment and destroy competitiveness.
Christa Markwalder, a lawmaker with the pro-business Free Democratic Party, warned foreign companies seeking to benefit from lower taxes and less strict regulations would be less inclined to move their headquarters to Switzerland
Despite the proposal’s detractors, public opinion increasingly shifted towards a “Yes” vote two weeks ago following the announcement that outgoing chairman Daniel Vasella was to receive $78 million over five years from the Swiss drug maker Novartis AG in exchange for not signing on with a competitor.
Similarly large bonuses were also blamed for encouraging risky investments which almost sank Swiss banking giant UBS.
Opponents admitted their efforts to warn about the economic implications of the referendum had fallen flat despite an 8 million franc war chest set aside to defeat it.
"We will respect the will of the people," said Pascal economiesuisse chairman Pascal Gentinetta said.
The initiative was spearheaded by Swiss entrepreneur and independent lawmaker Thomas Minder.
Minder, who introduced the proposals to end a culture of short-termism which he says is out of step with Swiss culture, said the referendum’s popularity is “a powerful signal."
“Even though Swiss people earn good money and have a high average salary, we also have a strong traditional feeling about what is good corporate governance,” The Independent cites Minder as saying earlier this week.
“You can have your second home, you can drive your Ferrari, you can eat beef every day, but Swiss people are middle class, with no extreme highs or lows.”
Other European states such as the Netherlands and Denmark have comparable legislation allowing shareholders a binding vote on executive compensation.
In the US and Britain, however, so-called “say-on-pay” votes are non-binding.