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2013-03-05 12:00:11
Mar 4th 2013, 12:35 by D.S. | BERLIN
PUBLIC wrath at the widening gap between packages awarded to company bosses and
the average citizen s take-home pay resounded through Switzerland on March 3rd.
Voters there overwhelmingly backed an initiative to give shareholders of Swiss
listed companies a binding say on executive pay and an annual right to vet
board appointments. Other sanctions would forbid the award to executives of
severance packages, side contracts, and rewards for buying or selling company
divisions. The penalty for infringements could be as much as three years in
jail, or the forfeit of up to six years salary.
This is powerful stuff although the results of the 68 % vote in favour still
need to be translated into workable laws. Some cynics suggest this could take
as much as ten years. As a starting point, the text of this people s
initiative , which has been in the works since 2008, will be written into the
Swiss constitution. Then it is up to the various organs of Swiss government to
put it into law. The Federal Council (Bundesrat) must formulate the
constitutional change within a year.
The Swiss business community has been shaken by this outburst of populism and
argues that it endangers Switzerland as a place to locate companies. A
counter-initiative offering shareholders stronger voting powers, but without
threatening criminal sanctions, was rejected by the electorate on polling day.
Economiesuisse, the Swiss Business Federation, accepts the public vote, but
says such complex and emotionally-charged changes should be implemented with
great care.
The initiative against Abzockerei (roughly translated as fatcat pay) was
started by Thomas Minder (pictured), a family entrepreneur from Schaffhausen.
It gained additional momentum in January on news that Novartis, a Swiss
pharmaceuticals company, intended to pay its departing chairman Daniel Vasella
a severance package of SFr72m ($76m). Mr Vasella later refused the package.
The people s initiative foresees that shareholders will be able to vote
bindingly at annual general meetings on the total amount of pay awarded to
board members and on ratifying their appointments for the next year. Pension
funds must vote in the interests of their members and make public how they have
voted. Board members may be offered no golden hello or severance package, nor
can they have consulting or other contracts with firms in the same group.
Given the worldwide debate on levels of pay and other rewards, particularly at
banks which have cost the taxpayer money, the Swiss plebiscite is a reminder
that resentment can rumble, even in an affluent society. Whether any
joint-stock company can actually be run on populist lines is another question.